Housing Development Finance Corp (HDFC) chairman Deepak Parekh mentioned on Tuesday that whereas India’s macroeconomic fundamentals are sturdy and restoration is underway, weak credit score development stays the important thing laggard.
“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in FY21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh mentioned in his chairman’s deal with on the forty fourth Annual General Meeting of HDFC.
However, in phrases of the general macroeconomic atmosphere, “the key challenge remains the unpredictability of the virus. The world is still susceptible to recurring waves of infections. Thus, economic recovery will remain uneven and patchy,” he mentioned.
Parekh expressed hope that the third wave of the pandemic received’t be as extreme because the second wave as extra individuals get vaccinated. “Let’s hope in India, we get more and more people vaccinated. The key here is more vaccination.”
There are a pair of components working in favour of India. The international change reserves and international direct funding inflows are at a report excessive, agriculture development is anticipated to stay sturdy with foodgrains estimated at over 305 million tonnes. RBI’s accommodative stance and authorities measures to alleviate covid-related stress would additionally assist in the restoration, Parekh mentioned.
Later, answering shareholders’ question, Parekh mentioned Mistry didn’t desire a prolonged extension.
“We may have given him 10 years however he didn’t need even three years. The board needed to power him on accepting a three-year extension,” Parekh mentioned on Mistry.
HDFC is “very happy” with its investments in HDFC Ergo and its insurance coverage enterprise, however within the case of Ergo, it must scale back its stake from 50.6 per cent to 50 per cent as per RBI directive, Parekh mentioned. Listing of some subsidiaries can also be a while away as these firms must develop first.
Parekh additionally mentioned it was not potential for HDFC to kind a holding firm, as towards any family-run agency comparable to Bajaj Finance.
“If we are a holding company, who’s going to give us the capital? A family-run company can put any amount of money in the holding company when their subsidiaries need money. If HDFC splits itself into two companies — the housing vertical and a holding company — wherever from we raise money all the time when all our subsidiaries need money?”
“The Coronavirus (Covid-19) pandemic has reaffirmed that there can be no greater security in life than a home. The inherent demand for home loans continues to remain strong,” Parekh mentioned in his opening speech.
The nationwide lockdown impacted particular person loans, however as soon as restrictions have been eased, “the demand surpassed all expectations. We are confident that demand for housing will continue to be strong,” he mentioned.
In FY21, demand for housing was each for inexpensive and high-end properties. The common measurement of housing loans stood at 29.5 lakh, in contrast with Rs 27 lakh within the earlier yr.
According to the finance veteran, in phrases of industrial actual property, most firms haven’t given up their office premises, and with the e-commerce growth, “demand for real estate is coming from warehousing and fulfillment centres”.
Similarly, with the build-up of digital infrastructure, demand for information facilities has elevated.
“These are the segments of the real estate sector that have potential to grow immensely,” Parekh mentioned.
HDFC, based on its chairman, will proceed to watch three key components — liquidity, development, and asset high quality.
As a prudential measure, the mortgage finance firm is sustaining increased ranges of liquidity.
However, asset high quality has been difficult for non-individual loans at a systemic degree, Parekh mentioned. HDFC has recognized such loans and has adequately supplied towards them.
Gross non-performing loans at March 31, stood at Rs 9,759 crore, or 1.98 per cent of the mortgage portfolio. The firm was required to hold whole provisions of Rs 5,491 crore, but it surely carried a provision of Rs 13,025 crore, which is 2.62 per cent of the publicity at default.
The firm declared a dividend of Rs 23 per fairness share of the face worth of Rs 2 every for the monetary yr.
Parekh mentioned in his query reply spherical that HDFC being a monetary firm, must be cautious and can’t declare dividends or bonus shares at will. The final bonus share was in 2002, and the share break up was in 2010 for the corporate.
The housing finance firm has additionally regularly let go of its excessive liquidity degree as Covid associated uncertainties improved.
“In the primary wave of COVID, there was a complete scarcity of liquidity and lack of capital. Companies have been unable to lift cash, so we needed to hold a a lot bigger buffer as liquidity. With the varied liquidity measures taken by RBI, the company is sustaining snug liquidity ranges and decrease the destructive carry which we’ve got (extra idle liquidity results in value).”
HDFC has no plan to checklist any of its subsidiaries as of now, whereas it’s “always open for acquisitions.” “We are all the time preserving our eyes and ears open, in case if any good proposal involves us,” Parekh mentioned.
However, HDFC did not wish to pursue shopping for DHFL, as even when it seems in any respect alternatives, it proceeds “provided that we discover it price pursuing.” Parekh praised LIC Housing Finance firm as a competitor and a well-run firm.
On its funding in Yes Bank, Parekh mentioned it can’t be liquidated simply now as there’s a lock-in interval of three years stipulated by the RBI.