August 4, 2017 forbes india | 45“We were asking for a 5-crore credit. This happened at a time when repayments had to be made, and we had to hold back some disbursements. The times were clearly different and hence the treatment was different... like we were suspects,” he recalls. Although the credit did come through, it taught Wadhawan valuable lessons. DHFL has, over the years, reduced its dependence on banks as a chief source of funds and has explored new avenues to raise money: In 2016, it raised14,000
crore through two non-convertible
debenture (NCD) issues; in 2017, it
added `1,969 crore to its net worth
by selling its entire 50 percent stake
in DHFL Pramerica Life Insurance
Company to DHFL Investments,
a wholly owned subsidiary.
“The capital infusion is sufficient
to drive growth of DHFL’s affordable
housing finance business for the next
two to three years,” Wadhawan says.
DHFL has also managed to stay
ahead of competitors such as State
Bank of India, Indiabulls Housing
Finance and LIC Housing Finance by
having their exclusive distribution
agents—instead of independent direct
selling agents, which some other
financing companies operate with—
who are vital to reaching low-income
segments in tier 2 and 3 cities. In
DHFL’s case, they are similar to what
business correspondents are in a bank.
“We are not dependent on third
party direct-selling agents, and
have our own sales and distribution
teams. They are residents of the areas
they operate in and have a strong
relationship with local brokers,
DHFL is inDia’s seconD L argest
private Housing Finance
company. it is growing at 18-20%
year-on-year For Five yearsDHFLand contractors,” says Mehta.
DHFL’s team of 2,553 distribution
agents—trained in-house—acquire
new clients, report to the sales
teams and execute all sales leads.
DHFL’s sales teams also pitch in
to help clients understand loan
applications and financial processes.
Another factor that has helped
DHFL stay ahead are the regions it
operates in. While competition such
as Indiabulls Housing Finance, LIC
Housing Finance and HDFC operate
in large metros and towns, DHFL
operates in tier 2 and 3 cities, where
it has a first-mover advantage.
“DHFL has a differential through
the geographies it operates in.
Where it will stand out will be by
continuing to reduce the cost of
funds,” says Alpesh Mehta, analyst
with Motilal Oswal Securities.
The two NCD issues in 2016 anda renegotiation of the pricing of its
bank loans helped DHFL reduce its
cost of borrowings by 84 basis points
on the entire book in FY17 to 8.83
percent. Industry data shows that
DHFL’s cost of funding reduced by
0.84 percent in FY17, while for HDFC
it was 0.62 percent, LIC 0.55 percent,
Can Fin Homes 0.4 percent and Repco
0.34 percent in the same period.B
esides continuing with its
focus on affordable housing,
the group is capitalising
on the retail franchise it has built
up through housing finance over
the past three decades. In 2012,
the group started Avanse Financial
Services, a non-banking finance
company focussed on educationloans. It also has a mutual funds
company, DHFL Pramerica Asset
Managers, which started in 2015.
In 2009, the Wadhawans split
the family-run businesses, with
Kapil taking charge of DHFL, and
brother Dheeraj, 38, who graduated
in construction management
from the University of London,
managing real estate development
through RKW Developers; Dheeraj
is also the non-executive director
on the board of DHFL. Their
uncle Rakesh Wadhawan and
cousin Sarang took charge of the
real estate company HDIL.
There are rapid developments
being introduced in Kapil Wadhawan’s
businesses to streamline operations.
Group company Aadhar Housing is
set to be merged with DHFL Vysya
Housing in the coming months; the
merged entity would cover 19 states.
Wadhawan also plans to expand
Avanse Financial Services into a
consumer finance company catering
to low- and middle-income segments;
a general insurance business is
expected to start this October, while
a wealth management business is
likely to start by next March.
“We are now in the process of
evolving into a diversified financial
services group, after being a monoline
housing finance company for
several years,” says Wadhawan.
To keep the DHFL flagship
housing finance company on track,
the company will need to keep doing
more of what it has done for decades:
Offer loans with favourable interest
rates, train its sales and distribution
staff, and expand on its digital drive.
But Wadhawan has a different
concern—of the “frenzy” that now
surrounds affordable housing. As
new players enter this crowded
space, it increases the fear of an
unsolicited exit of many of them.
The sector could well do without
anything similar to the crisis in the
microfinance sector a few years ago,
which led to tighter regulations and
limited credit limit from banks.