HDB Financial Services - Servicing All Financial Needs - Getting Geared towards Listing
HDB Financial Services Ltd was incorporated in Ahmedabad on June 4 2007, as a non deposit taking Non Banking Financial Company (NBFC) and is engaged in the business of financing. The company offers a wide range of loan products to various customer segments and act as a distributor of third party products. Company has opened 185 new branches and touched new 130 cities in FY19. Total stood at 1350 branches (1165) in 961 (831) cities in India as on March 31, 2019.
Segment:
Consumer Loans (Consumer Durable Loans, Digital Product Loan, Gold Loan, Auto Loan, Personal Loan and Loan against Mutual Fund Units), Enterprise Loans (Unsecured Business Loan, Loan against Property, Loan against Lease Rental, Enterprise Business Loan, Auto Refinance and Loan against Securities), Asset Finance (Commercial Vehicle Loans, Construction Equipment Loans, Tractor Loans) and fee based products / Insurance Service (Life & General Insurance products of HDFC Standard Life Insurance, HDFC Ergo General Insurance).
Company also act as telemarketer for Corporate Agent.
A Mutual Fund Distributor and deals in various third party products.
Company has set up 15 call centres with the capacity of over 5,000 seats which act as collection services for the entire gamut of retail lending products of HDFC Bank. It offers end to end collection services (back office, sales support services, operations and processing support to HDFC Bank) in over 750 locations through its calling and field support teams.
Shareholding Pattern:
Promoter (HDFC Bank Limited): 95.53%
Directors / Related Companies Shareholding:
HDB Employees Welfare Trust: 0.334%
HDBFC Employees Welfare Trust: 0.333%
Bhavesh Zaveri (Non Executive Director): 0.037%
Haren Parekh (Chief Financial Officer): 0.038% (44,714 shares added in FY19)
Jimmy Tata (Non Executive Director): 0.041%
G. Ramesh (Managing Director): 0.069% (66,400 shares added in FY19)
Total: 96.382% in the hands of Promoters / Management
Operations
The Company has been rated AAA;Stable by CARE and AAA/Stable by CRISIL for long term loans from banks. The Company's capital adequacy ratio as on March 31, 2019 was 17.91%, as against minimum regulatory requirement of 15% for non-deposit accepting NBFCs. The. asset quality of the Company remains healthy with Gross NPAs at 1.78% and Net NPAs at 1.12% as on March 31, 2019. During FY 18-19, the Company has disbursed loans amounting to Rs.32,211 Crore.
Company posted total income and net profit of Rs. 8,724.81 Crs. for FY19 (Rs. 7,027.12 Crs for FY18) and Rs. 1,153.24 Crs (Rs. 933.02 Crs) respectively.
Interest income stood at Rs. 6,712.12 Crs. (Rs. 5,331.29 Crs). Total Revenue stood at Rs. 8,724.81 Crs (Rs. 7,027.12 Crs). EPS of the company increased to Rs. 14.71 in FY19 as compared to Rs. 11.92 in FY18
Company declared a dividend of Re. 1.80 per equity share of face value Rs. 10
Loan disbursements during the year were Rs. 31,654 Crs (Rs. 25,341 Crs). Asset under management of the company increased to Rs. 55,425.16 Crs (Rs. 44,268.31 Crs)
NBFC Crises
In the midst of a large NBFC defaulted on five successive loan repayments and one fund house offloaded around Rs. 300 Crs. worth of NCDs of the housing finance company at a discount, a market grapevine of a systemic liquidity problem in the NBFC space or asset liability mismatch which led a free fall in NBFC stocks creating bearishness all around, HDB stand strong with no interest payment or principal repayment of the Term Loans was due and unpaid as on 31 March 2019.
NBFC sector is more fragile than what it was one year ago. Government is working tirelessly to resolve the issues to bring back the liquidity in the market. Better run NBFCs that maintain a matched asset liability profile, with diversified portfolio, expanding the asset base with newer products with less concentration in large clients will withstand strongly. The Government increased focused on the rural economy will boost the strong NBFCs due to it’s ability to customise products, microfinance, small ticket housing loans and loans against property.
HDB Outlook
HDB has continued to focus on diversifying its products and expand its distribution to effectively deliver the credit solutions in the economy. The company has well defined Key Risk Indicators for each key risk and distinct policies and processes are in place to manage and mitigate the risk. Markets will continue to grow and mature leading to differentiation of products and services. Each financial intermediary will have to find its niche in order to add value to consumers. Company is cautiously optimistic in its outlook for the year 2019-20. The Company caters to the growing needs of India's increasingly affluent middle market. The requirements of medium, small and micro business enterprises that are too small to be serviced by corporate lending institutions are also addressed by the Company through suitable products and services. These segments are typically underserviced by the larger commercial banks thus creating a profitable niche for the company to address.
Key Strengths of the Company:
Access to Cost Effective Funding: The Company has access to cost effective funding because of its strong parentage and conservative risk management policies. The Company maintains relationship with several banks and financial institutions.
Experienced Management Team: The Company has an experienced management team which is supported by efficient and capable employee pool. The board comprises of senior professionals of HDFC Bank who have in depth experience in the financial services Industry and in Banking. The senior management is composed of professionals who have deep understanding of the industry and have extensive experience in financial services sector.
Effective Risk Management policies: The Company recognizes the importance of Risk management and has accordingly invested in processes, people and a management structure. The risk committee of the Company also reviews the asset quality at frequent intervals. Product policy programs are duly approved before any new product launches and are fine tuned regularly. The asset quality of the company continues to remain healthy and the Gross NPAs at 1.78% and Net NPAs at 1.12% as on March 31, 2019. The Company's competitive advantage is product innovation and being able to customize a product to the requirements of the customer.
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