Deo Shankar Tripathi, MD & CEO, Aadhar Housing Finance, outlines the company’s plans for expanding its operations:
Aadhar Housing Finance is one of the largest affordable housing finance companies in India servicing the home financing needs of the low-income sections of the society. The company aims to empower the underserved millions to own their first homes. Established in 2010, it has served more than 133,000 customers through a well-diversified network of 311 branches in 20 states and union territories.
In the first quarter of 2019-20, the company added around 7300 new home loan customers and disbursed `6.64 billion of retail home loans. The company’s MD and CEO Deo Shankar Tripathi says disbursements as of the first quarter of the current FY decreased 17% yoy over the same period last FY decreased by 17%. This is mainly because the company wanted to keep sufficient liquidity during QI in view of the sale transaction of company to Blackstone was in process.
AFFORDABLE HOUSING 78%
At Aadhar Housing Finance, affordable housing loans consist of approximately 78% of the entire portfolio, while mid and luxury segments constitute 21% and 1% respectively. Says Tripathi: “For FY 2018-19, `2.25 billion of PMAY interest subsidy has been received for 10,171 loan accounts (for all scheme categories – EWS/LIG/MIG-I/ MIG-II) and the same has been provided to the eligible recipients. As on 31 March 2019, cumulative PMAY subsidy received was `2.48 billion for 11,529 loan accounts.”
TIE-UPS WITH BUILDERS
The company has tie-ups with more than 250 small and mid-size builders engaged in construction of affordable dwellings. It largely focuses on financing selfconstruction and plot plus construction. “Our dependence on builder supply is low and that too in a few states like Gujarat, Maharashtra, Telangana, parts of MP, UP, Tamil Nadu, etc,” says Tripathi, adding: “Cost of borrowing during FY 18-19 after September 2018 had gone up by 70 bps and hence we increased interest rate by 50 bps in 2 tranches.”
Tripathi says there has been some correction in the range of 10%-15% in price of apartments in the middle and luxury segments, but in the affordable housing segment (flats costing up to `250,000), there has been no noticeable correction.”
Aadhar Housing Finance strives to provide quality and transparent service to its customers. It has dedicated call center (tollfree), which contacts all new customers for feedback as well as responding to queries and complaints. The management of the company as well as the board periodically reviews and enhances customer service.
Says Tripathi: “We measure customer satisfac tion t hrough parameters of c ustomer’s l oyalty to the company, resolution of customer complaints/requests within the TAT with utmost customer satisfaction, customer feedback received through calls/emails/branch interactions and customer interactions with branch officials, feedback on social media.”
The company has a dedicated customer retention team which i nteracts with customers and helps them in various areas, including loan closures. The team informs the customers about various offers available and helps the customers to continue with the company. Currently, the company’s average retention ratio is around 13-15%. The company offers general insurance and life insurance products to its customers as an option and these are protection insurance covers to help the customers and their family in case of critical illnesses or any eventuality. “So far, the success of customers opting for such products is quite satisfactory,” says Tripathi.
NBFC CRISIS IMPACT
Aadhar Housing Finance has had some impact from the NBFC crisis post September 2018. Says Tripathi: “We slowed down our disbursements during September 2018 to March 2019 to the extent of 40% of the projected disbursements. We managed liquidity through sale of loan pools to banks. The National Housing Bank too supported us through refinance.”
The incremental cost of borrowing during the period had gone up by over 1%, which increased the company’s overall cost of funds by 70 bps.
Aadhar Housing Finance has always believed in conducting low cost, high impact marketing activities using a mix of Above the Line (ATL), Below the Line (BTL) and digital mediums. On the ATL side, the
company has executed its integrated brand campaign ‘Ghar Banega, Toh Desh Banega’ done across India using outdoor hoardings, bus panels, bus shelters, digital and social media and PR. It also did various themebased campaigns throughout the year using print and mobile-based mediums. “We have always put emphasis on innovative and interactive BTL activities, which are done with an objective of creating awareness among the low income segments at our service locations. We follow various formats of these kinds of BTL activities like Aadhar Parichay, Aadhar Paramarsh Shivir, Aadhar Awaas Mela etc,” explains Tripathi.
The company’s maiden NCD public offer in September 2018 was also promoted extensively through outdoor-hoardings, bus-panels and bus shelters, print ads, television ads, digital advertisements, road shows and strategic PR.
Keepi n g i n mind t h e g r o wi n g penetration of internet and smart phone users, the company has significant digital and social media presence. Tripathi says the company mainly uses these mediums to create awareness, interact with our target segment and bond with our prospects and customers.”
IMPROVING IT INFRA
Currently, the company does not have online home loan application facility. However, it is in the process of upgrading its technology infrastructure. “We have undertaken incremental improvements in IT infrastructure to enhance application performance and high availability. We are envisaging transformation of key business processes to improve productivity with automation in the coming 12 months. Our overall approach as far as IT is concerned has been to enable the business with anytime anywhere capabilities and ease of doing transactions,” explains Tripathi.
Post September 2018, the liquidity squeeze and the NBFC issues have adversely affected the sentiments of the lenders and investors impacting the growth of the NBFCs. Tripathi believes that measures announced in the budget will restore the confidence among investors/ lenders, which will help the NBFCs/ HFCs to get liquidity for their growth. The measures will restore the confidence among the lenders/ investors for the good run NBFCs, particularly those which are lending to retail segment and have strong corporate governance, he adds.
The growth for the industry is expected to come back to CAGR of 18-20% over medium term. The demand in lower income segment will continue to remain robust and Tripathi says with budget measures supporting liquidity coupled with less competition, Aadhar will Housing Finance will continue its sustainable quality growth in double digits going forward.
The company’s NPAs on yoy basis remained constant. It closed NPAs in 2017-18 and 2018-19 at 0.58%. Its collection team is divided into two - soft and hard bucket. Tripathi maintains that in the current FY, the company is not only targeting NPAs to be at a lower level but it is reducing overall delinquency. Soft bucket comprises fresh bounce and 1 to 30 dpd (days past due). Hard bucket comprises of 31 to 60 dpd and above. Teams are divided accordingly to increase the focus on all the buckets.
PLANS & TARGETS
Aadhar Housing Finance does not plan to expand its branches at present. Tripathi indicates that this year it proposes to grow its AUM at 25%, considering the hangover of liquidity flow problem after March 2019. He expects the liquidity position to be normal in the second half of the year.