The demand for housing is back after the second Covid wave and overall tailwinds are positive, believes Ravi Subramanian, Managing Director and CEO, Shriram Housing Finance. In an interview with BusinessLine, he said the company is looking at faster growth after the performance in June. Housing finance companies should be allowed to charge prepayment penalty in initial years, he further said. Edited excerpts:
How is the demand for housing post the second Covid wave?
Demand is back. In June, we did 80 per cent of our regular disbursals. Collections were back on track and we collected from almost 99 per cent of the customers we had originated in the last three years. It has improved further in July. The cheque bounce rates have reduced and in July were the lowest in the last 12 months. People are now reconciled to Covid, business is getting back on track. If we get another two months, business will be back roaring across the country.
Which are the segments where there is demand?
We are seeing a lot of demand in Tier 2 and Tier 3 towns. People are expanding their houses. Self-construction is giving us good volumes. Smaller and affordable housing projects are seeing a fair bit of traction. There is a lot of demand in the Rs 20 lakh to Rs 25 lakh segment, and the higher end of the spectrum, which is absolute ultra luxury. Our NPAs are well under control. NPAs had deteriorated by about 20 basis points in April, May and June. But given that our collections have picked up and bounce rates have come down, I expect September to be a far better quarter.
What kind of growth are you targeting?
Last year, the Covid impact stayed till the end of the first quarter. We started disbursing at the end of July and early August. Despite that, we grew our disbursals by about 90 per cent last year. This year, disbursals have started in June. If I get a clear runway from now on till the end of the year without a third wave, then disbursals could increase by at least 60 per cent to 70 per cent. Last year, we did about Rs 2,100 crore and this year we will do at least Rs 3,000 crore provided we get a clear runway from now till March. We will end up with assets under management of about Rs 5,500 crore to Rs 5,700 crore. June has brought the growth agenda back on the table.
How do you perceive competition from banks that offer low interest rates?
HFCs should be allowed to charge a prepayment penalty in case the customer moves in the first two-and-a-half to three years. The low interest rates are not much of an issue. There are many critera and not many customers meet it. It is a headline rate. My attrition last year for balance transfers was 9.5 per cent. We have a fairly aggressive retention process where every customer who wants a foreclosure letter is spoken to, their needs are assessed and we try and retain the customer.
How much restructuring have you done?
We did Rs 58 crore of restructuring in the first round on a Rs 4,000 crore AUM. About Rs 26 crore to Rs 27 crore were from customers who were current and not delinquent. In round two, we did a similar number of Rs 58 crore to Rs 60 crore of restructuring. So my total restructuring is about about 2.6 per cent of my total book.
Are you looking at any acquisitions?
We were interested in an HFC buyout earlier this year but the target company pulled out at the last stage. We will be happy to look at acquisition opportunities for an HFC with an AUM of over Rs 1,500 crore. If we don’t get a good acquisition opportunity, we will build it.
What is your strategy for expansion?
We are looking at faster growth now. Last year, we opened 26 branches of Shriram Housing co-located with Shriram City Union Finance in Andhra Pradhesh and Telangana. This year, we had initially planned to get to 100 branches from 26 branches this year. But after our experience in June, we have decided to fast-track it to all branches of Shriram City Union Finance in the two states by September.
Have you become more careful in underwriting customers?
Caution can never be wished away in the lending business. We do not want to do large value loans. We will do restricted LTV. We will not do new to credit customers. There was a time when our new to credit customers were 25 per cent to 30 per cent. Now, it is at about eight per cent to nine per cent. About 80 per cent of our customers have a credit score of more than 700.