Indian Tax Solution

Look at loan book growth on AUM basis, not outstanding basis: Keki Mistry, HDFC

If you look at the loan book growth, look at it on an AUM basis and not on an outstanding basis because in 2017-2018, we had not sold a lot of loans. HDFC BankNSE 0.97 % is one of the distributors of loans for us. They source loans from a variety of customers, send it to our office and we do the credit legal technical checks. We decide whether to lend money to a particular customer or not. If we decided to lend money, we will make the disbursements and then we have an agreement with the bank that they have a right to buy back up to 70% of these loans.

In 2017-2018, we did not sell enough loans to the banks because there was uncertainty on the applicability of GST on securitisation transactions. We sold only Rs 6,453 crore worth of loans which largely happened in the first quarter and from the second quarter onwards. no sale took place. But there was a backlog. We were obliged to sell 70% if the bank wanted which they had not been sold and therefore those loans were sold in the current year. So you have to look at it in that context.

Again, Rs 6,453 crore of loan sold last year. This year, sale of loan was as much as Rs 25,150 crore. Individual loan book growth on AUM basis were 17%, non-individuals was 8% and overall was 15%. Right from June onwards, we have been talking to investors and saying that we would be cautious at times like this and that is a reason why a non-individual business has grown at a slower pace than what it historically is.

Once we are convinced that whatever little stress there is in the system has gone away, we will be very happy to look at growing the non-individual book also in a big way.

In the non-individual segment, we have three categories of loans one is construction finance, the second is lease rental discounting loans and the third is corporate loans. The LRD (lease, rental, discounting) component is something we continue to remain very focussed on.

On a balance sheet basis, LRD loans today constitute 9% of our total balance sheet, on an incremental basis for this year it constitutes as much as 10%. Individual loans constitute 74% on a balance sheet basis but 85% on an incremental basis between April 18 and March 19.

There is an overall slowdown in the real estate sector. How do you think that will impact the lending for your corporation?
The real estate sector broadly speaking gets classified into two broad categories; commercial and residential. Commercial market has been strong for the last two or three years, has been very strong.

Residential can be further broken down into the affordable housing segment and the high-end market. The stress that you are talking of is more in the cities, more in the high-end market. In many cities, there is oversupply in the market and because of the oversupply, not too many new launches are taking place. Sales have slowed down and that is one of the reasons that was being attributed to GST. Till March 2019, GST was applicable at the rate of 12% on the purchase of any real estate, residential property with some setoffs.

Post 1st April 2019, GST rate has been lowered from 12% to 5%. I would think that over the next two quarters, one needs to wait and see what kind of impact the lowering of the GST rate will have on demand. But having said that, in the affordable housing segment, the demand for housing has been very strong. March, for example, has seen extremely strong growth from our perspective. In fact, March 2019 saw by far the fastest growth any time in last 40 years odd in any month.

Two of your subsidiaries; HDFC Ergo and HDFC Credila are still not listed. Any plans to do anything on that front?
At some point of time, certainly we would look at listing both these companies but not in the current year. We had said before and we would reiterate that we would look at adding the health insurance business in a much bigger way to HDFC Ergo before we look at listing this company. So yes, the plan is to list but probably not in the current year.

As far as the acquisition of Gruh Finance by Bandhan BankNSE 0.10 % is concerned, we have seen some of the regulatory approvals coming in and some of them NHB and NCLT is still left. Shareholders' approval is also left. So, what is the timeline for the deal? Also, are you looking at buyers as far as reducing your stake below 10% is concerned?

When we announced the merger, we said we are happy to hold up to 14.9% shares in Bandhan Bank. RBI approval came in a few months ago which said that we could hold only 9.9% shares which means that we have to sell shares of Gruh prior to the merger with Bandhan Bank. NHB is our regulator, NHB has approved the merger of Bandhan Bank with Gruh. But NHB has not given approval to us to sell some shares in Gruh which is something which we are awaiting. We have applied to NHB sometime back and we continue to have a discussion with them on this.

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