Dewan Housing Finance Corporation on Monday said the company has not made a single day's delay in meeting payment obligations. The company has neither defaulted nor faced a delay in repayment and the mayhem on Friday was due to a challenge with another nonbanking financial company (NBFC), said Kapil Wadhawan, chief managing director of DHFL.
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"We made a Rs 700 crore payment on Friday and making another Rs 900 crore payment to CP (commercial paper) holders today," Wadhawan told CNBC-TV18.
The clarifications came after the company on Friday lost more than 50 percent in the trade with the stock hitting a 19-month low of Rs 274.75, as it witnessed heavy selling on concerns of liquidity default.
Shares of DHFL bounced back sharply on Monday, surging 25 percent after a massive selling spree on fears of a liquidity crisis on Friday.
The shares ended at Rs 392.15, surging by 11.87 percent, adding Rs 41.60 in value, after Friday's sharp decline to Rs 350.55. The stock touched an intraday high of Rs 438.15.
We were discussing with some other management as well about the possibility of defaulting on any of the scheduled payments, just to clarify has DHFL defaulted on any of their scheduled payments up until now?
Absolutely not. We have not defaulted and there is not even a single day’s delay. This has been our longstanding, unblemished history for the past 34 years.
In fact, on the day of the mayhem as well, just to put on record, it was business as usual for us. We made a payment of almost Rs 700 crore for CP (commercial papers) as well as some of the other bank obligations and there is a Rs 900 crore payment going today as well to the CP holders.
What is your sense about the debt market’s scare, it was just a scare? Do you think they will refinance before the calendar year is out and this will be forgotten?
I do hope so because we were caught in this contagion effect, which was least expected. There was a challenge with another nonbanking financial company (NBFC) in the system, which resulted in all the mayhem that we saw on Friday.
For us, it was business as usual, our fundamentals continue to be extremely strong. I am sure that this will tide over. We have already heard positive statements coming from the government as well as the regulators and more importantly from the largest bank in the country.
By when do you think this refinancing can come, will they start picking up by six months and you have enough money to redeem CPs until then?
We went out and did an overreach with our investors. We have put out on the exchanges our liquidity position for the next six months that even without any capital market exposure.
We will be comfortable in not just reaping all the contractual obligations that we have but also ensure that our growth trajectory is decently maintained. However, that business does not function purely on a basis of an ongoing concern. As an ongoing concern, you have to be out there, wanting to continue to grow the business and for that, we will obviously go back to the bankers and seek all the undrawn credit lines that we have for us to continue with our business as usual.
What is the amount of undrawn credit lines?
We have a total of Rs 12,000 crore of undrawn credit lines, which are already approved from the banks.
What is your networth to leverage?
Our net debt to equity is about 7 percent, which is fairly comfortable. Today, the National Housing Bank (NHB) regulation demands or asks us to maintain 16 times leverage. Obviously, we don’t even want to or intend to get there, we have always maintained a healthy debt leverage position.
Your leverage is seven times your networth, right?
Do you expect your pace of growth to get impacted for this year, what kind of a loan growth you think is possible in FY19 but more importantly in FY20?
We started growing quite aggressively thanks to the Pradhan Mantri Awas Yojna (PMAY) announcement by the government. This being the government’s pet project, DHFL was in the forefront in going out and lending in to the low ticket sized segments, low middle income segments in tier-II, tier-III markets.
Now, we were obviously in the last quarter growing at a much faster pace than what we had grown in the previous quarters. Obviously, looking at the situation, maybe 5-7 percent shave off in growth can very well be managed but it will still be anywhere between 18 percent and 20 percent.
What about the cost of funds, what is the expectation going ahead, will you see a big jump there?
I don’t think there will be a big jump in any of these matrices and more importantly, because we were caught in this complete contagion effect which happened on Friday, extremely unaware of what was on the anvil. Till 12 o’ clock on Friday, it was business as usual as far as we are concerned. All of a sudden, we just got caught in this entire mayhem.
It is tough for you to comment but the buzz in the market circle is that was the fall in DHFL stock related to how Yes Bank fell initially and that there are some related transactions, just your thoughts on that?
These are market chatters. I haven’t seen so many market rumours emanating in my entire working life -- which has been more than 20 years now -- suddenly in the market in the last 48-72 hours.
What is your line of credit from Yes Bank at all?
In the total liability pool of Rs 51,000 crore from the capital markets, the Yes Bank exposure is about Rs 3,700 crore in our long-debted non-convertible debentures (NCD) and that is the only credit availability that we have from them.
Finally, do you see margins now getting squeezed? If you go to banks, they are also in housing finance, so how do you expect your spreads to compare in FY19 vis-à-vis FY18?
In the last two and a half to three years, we have adopted a very different model of funding our growth. If you see Rs 121,000 crore of assets under management, Rs 20,000 crore of assets were down-sold to the banks.
This was absolutely after the banks undertaking all kinds of diligence. About Rs 21,000 crore of assets were actually down-sold. We pre-empted and realised that the market is not deep enough for us to give the kind of liquidity to back our growth over the next – as we keep on growing at the pace that we are. This year, for example, we had anticipated a fresh lending of close to about Rs 55,000-57,000 crore, so down selling of portfolio, which is very common in other parts of the world was the way of also supplementing our liquidity as well as churning our overall cash position and a good capital efficient model.
So, I honestly, don’t think that other than the overall macro-economic situation where interest rates have already started inching up, that is the only impact I see coming on to the DHFL cost of funds, which also can be passed on to our customers immediately as the cost of funds go up.
What is the exact exposure that you have to the loan against property (LAP) segment and to builders in general?
About 81 percent of the loan is absolute retail, which includes the loan against property segment as well. We are extremely efficient as far as our housing loan exposures are concerned and are pretty granular because those exposures are very granular in nature.
So 60 percent of the exposure is to absolute home loans, 21 percent of the exposure is to loan against property (LAP) and other SME lending activity that we undertake and about 17-18 odd percent is the total exposure to the developer segment.
There is some talk that Reserve Bank of India (RBI) is planning some stringent regulations against home finance companies that have a large exposure to the real estate segment. Is there any merit to this talk?
These are again a part of the rumour mills that went around in the last 48-72 hours. RBI or our regulator NHB, they keep on discussing with us, inspecting us, so I haven’t heard anything of this sort, which may impede any initiatives by HFCs to lend to any particular segment.