Enabling Access
Presentation Structure Housing & Housing Finance About DHFL Aadhar A New Initiative Potential Challenge The Business Model Road Map
Importance of Housing
Role of Housing Finance Even in the best of environments, housing is a major purchase average home prices typically range from 4 times annual income in developed countries to 8 times annual income in emerging economies. (Ball, 2003). Provision of housing finance is a binding constraint that must be addressed before the market can sustainably provide adequate housing. In the absence of a well-functioning housing finance system, other housing or housing finance solutions are possible such as subsidies and the outright provision of public housing but these can be unsustainable (Quigley, 2000)
Founded by Late Shri Rajesh Kumar Wadhawan in 1984. DHFL today has presence in 219 locations across India through its branches and service centre, along with 2 international representative offices in Dubai & London Tie-ups in 3 public sector banks provide an additional reach across 123 locations.
Our Vision: To meet the housing requirements of the large middle and lower income segment of the population. This segment found it Impossible to get loans on fair terms We Believed that they could be Trusted This Belief was Profitable
Our Financials Financial Highlights as on 31 st March 2010 Profit after tax is at $ 35 million which has increased by 65 % as compared to last year. Net Interest margin is 3.00 % Net Non performing asset % stood at 0.88 % which in F.Y. 2006 stood at 1.30 % Balance Sheet Size of $2273.24 mn. High credit ratings P1+ (CRISIL) for short term debt, AA+ (CARE) for fixed deposits and nonconvertible debentures. Customer Profile Average loan size disbursed is $10000 Majority of the customer in the income group of $ 175 to $ 550 per month. 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 25.0 20.0 15.0 PAT (Rs.mn) 33.5 20.4 14.6 9.3 10.8 6.0 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 ROE (%) 22.9 22.2 18.1 19.4 17.0 10.0 5.0 0.0 FY 06 FY 07 FY 08 FY 09 FY 10 Net NPA (%) 1.4 1.2 1.3 1.0 1.2 1.1 0.8 1.0 0.6 0.9 0.4 0.2 0.0 FY 06 FY 07 FY 08 FY 09 FY 10
Capability Matrix Trained Manpower Strong Credit Customer Focus Service Delivery Efficient Operations Information Technology
Limited Impact: Subprime Crisis The DHFL Story: Asset Liability Mismatch Low NPA Refinancing facility from National Housing Bank (NHB) Limited impact of subprime crisis on India Aggressive Growth in assets and profits wherein PAT in the F.Y 2008-09 grew by 40 %, And in 2009-10 grew by 65%.
Aadhar A DHFL & IFC Venture Objective: To create a Housing Finance company which provides access to Housing Finance to lower income segment of India s population with income levels between $ 1300 p.a. to $.5300 p.a. The company would operate in the urban, semi-urban and rural areas. In Phase -1, this Company will focus on the identified 6 States which are, Madhya Pradesh, Uttar Pradesh, Bihar, Chhattisgarh, Orissa and Jharkhand.
Potential 2005 (household income) 2010 (household income) 22 million Rich (A) Income over Rs 2,42,000 p.a. CAGR = 11% Rich (A) Income over Rs 2,42,000 p.a. 37 million 16 million Consuming Class (B) Income Rs 2,11,200 Rs 2,42,000 p.a. CAGR = 6% Consuming Class (B) Income Rs 2,11,200 Rs 2,42,000 p.a. 21 million 34 million Climbers (C) Income Rs 1.33,672 Rs 2,11,200 p.a. CAGR = 8% Climbers (C) Income Rs 1,33,672 Rs 2,11,200 p.a. 49 million 80 million Aspirants (D) CAGR = 0% Income Rs 71,280 Rs 1,33,672 p.a. Aspirants (D) Income Rs 71,280 Rs 1,33,672 p.a. 80 million 53 million Poor (E) Income less than Rs 71,280 p.a. CAGR = (9)% Poor (E) Income less than Rs 71,280 p.a. 35 million Source: National Council of Applied Economic Research, 2005 Figures in brackets indicate annual household income Source: Business world, NCAER 1 US$ = Rs 44 5/25/2010 New Co.-DHFL & IFC Initiative 11
Potential 2% 8% 3% 6% Rising per capita income The per capital income in the Six states is on the rise. 67% 11% 4% As per census 2001, 1/3rd of the countries population reside in these states. These states as percentage of the total credit Disbursed in country contributed only 9.4 %. Credit per office is very Low in these states as compared to overall credit per office $8.21 mn on all India basis. Chattisgardh Bihar Jharkhand Madhya Pradesh Uttar Pradesh Orrisa Rest Census 2001 Total Credit as on Mar-09 State % share Avg* Bihar 0.8 1.40 Jharkhand 0.6 2.37 Orissa 1.3 3.05 Chhattisgarh 0.7 4.02 Madhya Pradesh 2.0 3.38 Uttar Pradesh 3.9 2.63 Rest 90.6 8.21 Source: Reserve Bank of India
Potential cont Each of these states aim to promote rapid industrialization in the State Develop necessary infrastructure facilities(power, Roads, IT, Etc); and generate adequate employment opportunities. The Government has undertaken several policy measures and incentives so as to provide ample business opportunities. Committee on Infrastructure (CoI) has estimated the investment requirements for some of the key infrastructure sectors, to be achieved by 2012. These include:- Rs.2,20,000 crore for Modernization and up gradation of highways; Rs.40,000 crore for civil aviation; Rs.50,000 crore for ports; and Rs.3,00,000 crore for railways.
Challenge Specific Urban population is on an average at less than 20% for all six states. Poverty is approximately at 40 percent as compared to overall 25 percent. Thus affordability would be a problem. Credit Risk Clear Property Title Macro level Lack of Secondary market (Securitization) Robust Legal System Credit Information System House Price Index
The Business Model An Inclusive Model, incorporating DHFL learning Aadhar Internal Customer Relations In-house Credit & Technical Appraisal Legal Appraisal through empanelled lawyers Local Builder Customer Government In-House Collections & Recoveries Complete solution provider matching customer Cash flow Aid Agencies Business model would aim at bringing affordability, Cost to serve, and Matching customer Cash flow.
5 Years Road Map To be a trusted and respected name in this segment To disburse loans to 25000 customers by F.Y 2015-16 Non Performing Asset of less than 1 percent Break even in end of 3 rd year of operations PAT of $4 mn in F.Y. 2015-16 $ 450 mn company by F.Y 2015-16.