Kapil Rajeshkumar Wadhawan, chairman and managing director of Dewan Housing Finance Corporation (DHFL), has played a significant role in shaping policy guidelines on matters relating to the mortgage finance industry. Wadhawan, 45, joined DHFL in September 1996 as a director and established Aadhar Housing Finance Ltd, Avanse Financial Services Ltd and DHFL Pramerica Life Insurance Company Ltd.
A Bachelor of Commerce from Bombay University and an MBA (Finance) from Edith Cowan University, Perth, Australia, Wadhawan said company is looking to sell Rs 15,000 crore of loans by March, 2019 and 80 percent are in retail segment. Wadhawan said to CNBC-TV18 that DHFL is planning to divest some of the stake in Aadhar and Avanse and added that regulators will have to sit with mutual funds and ensure the system is unclogged.
Q: If you can confirm this news flow that you have raised Rs 3,000 crore in the last two weeks and would further fund raising be an issue if most of your good loans have already been sold? We are a retail housing finance company and 80 percent of our loans are in retail segment. Yes, I would like to confirm that in the last two weeks or so, we have sold down close to Rs 2,500 crore of loans to banks.
As we speak, we are already in discussion at various stages. We are looking to sell down close to Rs 9,000 crore of loans. So between now and March, we have a pipeline of almost Rs 15,000 crore of loans, which will actually be sold down to banks and as we speak, about Rs 9,000 crore is currently in an advance stage of discussion with various banks and institutions.
Q: Did you get cash in lieu of those loans or did some of the banks say cancel some of our loans and for some of it we will pay you cash?
A: This is fresh funding. This is not against any of the other term financing loans that have been done in the past. These are fresh loans.
Q: Will you be able to raise cash, because some bankers have told us that we would like some of our loans cancelled, some of it we will pay?
A: This is a fresh facility that we are talking about and there is no question of selling down these loans for conversion of any of these loans into or substituting that with any of their terms facility etc.
Q: What is the liquidity situation now on the books? The last time when we spoke with you, DHFL hold almost Rs 10,000 crore in the system, which is about six month worth of cash. What is the liquidity situation at the moment?
A: In the last couple of weeks, we have repaid almost Rs 5,000 plus crore of obligations. Of that, almost Rs 2,400 crore is towards CPD payment. Yes, we do have cash on our books in excess of about Rs 3,500-4,000 crore now, but these sell down of loans will assist us greatly in overcoming some of the shorter term blips that we might face on the CP side.
A: Till December, we have close to Rs 7,500 crore of repayments of commercial papers (CPs) and that is the end of our CP book.
Q: How much is coming for redemption till December 31 and how much till March 31? Currently, we are at about 7-7.5 percent of CPs in our total liability. So, once we make these repayments, our CP concentration will be down to zero. Q: And you have Rs 7,500 crore?
A: That’s right, we are already working towards the sell down and we should be able to garner all the cash available to meet these obligations.
Q: Rs 3,000 crore came from securitisation. The remaining will also come from securitisation or do you have some other investments you can liquidate?
A: We have certain investments, which we will liquidate. But we are expecting a lot of the money flow to happen through the securitisation route primarily because banks have still taken a very conservative view on doing any fresh term financing for the industry as a whole and being a retail housing finance company with a strong sell down model build over the last two-three years. I believe that we are in a much better position to work alongside the banks and make sure that these assets are sold down and generate liquidity for the same.
Q: That is the feedback we are getting from a lot of industry participants. When you say conservative view, what do you mean? Have they stopped giving out fresh loans completely for the time being?
A: We have raised money through the CP route of almost Rs 6,000 crore in the last ten days or so and that is from the CP mutual fund market, but predominantly banks are today looking at a sell down. We have seen certain announcements coming from some of the banks as well that they are looking at portfolio purchases rather than taking any fresh terms financing view for now.
Q: What is the incremental cost of funds now versus the average cost of funds that you have been sitting with? We have done securitisation transaction in the last couple of days at fairly favourable rates. Going forward and looking at the overall tightness in the liquidity market, we expect interest rates to move up a bit.
But considering that 100 percent of our book is available book for us to pass on any rate increase will not be difficult at all.
Q: How much have you increased your lending rate already?
A: We have not increased our lending rate just yet. A couple of weeks back, we increased our deposit rates a bit and 10 bps on the existing book, but we haven’t gone out and raised any interest rates as of now.
Q: Your last number when you reported Q1, your assets under management (AUM) had grown by 37 percent. For the full year will the AUM grow, will it contract. If it does grow, then by how much?
A: Difficult to estimate now as to what the AUM growth will be. But yes, going by the first quarter and yes, a major part of the second quarter, we expect at least 50 percent odd growth in the overall AUM going forward. As on June 30, our AUM was at about Rs 120,000 crore, but there might be a small incremental increase. But what is important is that in all of this, my CP exposure on the liability side will be down to zero which is important.
Q: With Pramerica what was the deal that got closed?
A: They are our joint venture partners in both the life as well as asset management business and we continue to grow that business uninterrupted.
Q: You are not thinking of any of that or selling out your stake? We are looking at some strategic partners in our two other lending arms that is Aadhar Housing Finance and Avanse.This was something which was being looked at very proactively much before some of the market developments happened in third week of September. So, DHFL hold stakes in both Aadhar and Avanse and we believe that there is an opportunity for us to go and divest some of the stake and get a strong strategic partner in, so that we can put in some capital in DHFL as well.