Housing Development Finance : 'Transcript of Earnings Call on Financial Results of the Corporation for the quarter ended June 30, 2021'

"HDFC Limited

Q1 FY22 Earnings Conference Call"

August 02, 2021

MANAGEMENT: MR. KEKI MISTRY - VICE CHAIRMAN & CHIEF EXECUTIVE OFFICER

MS. RENU SUD KARNAD - MANAGING DIRECTOR MR. V. S. RANGAN - EXECUTIVE DIRECTOR

MR. CONRAD D'SOUZA - MEMBER OF EXECUTIVE MANAGEMENT & CHIEF INVESTOR RELATIONS OFFICER

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	HDFC Limited
	August 02, 2021
Moderator:	Ladies and gentlemen, good day and welcome to HDFC Limited Q1 FY'22 Earnings Conference
	Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an
	opportunity for you to ask questions after the brief commentary by the management. Should you
	need assistance during the conference call, please signal an operator by pressing '*' then '0' on
	your touchtone phone. Please note that this conference is being recorded.
	We have with us from the management of HDFC Limited, Vice Chairman and CEO - Mr. Keki
	Mistry, Managing Director - Ms. Renu Sud Karnad, Executive Director - Mr. V. S. Rangan,
	Member of Executive Management & Chief Investor Relations Officer - Mr. Conrad D'Souza.
	I now hand the conference over to Mr. Keki Mistry. Thank you. And over to you, sir.
Keki Mistry:	Well, thank you very much, and good afternoon to all of you in India and good morning to those
	in UK or Europe.
	At the outset, I would like to welcome all of you to HDFC's Earnings Call for The First Quarter
	of the Current Financial Year. The Board of Directors at its meeting held earlier today approved
	the financial results for the quarter ended June 30, 2021, which was subjected to a limited review.
	Over the next few minutes, I will give you a summary of the key highlights of the performance
	for the quarter.
	In April 2021, India witnessed an eruption of a second wave of the pandemic. Whilst the second
	wave was more severe than the first wave in terms of infections and mortality, the disruption to
	business activity was lesser than during the 1st quarter of the previous year.
	This was due to a significantly less stringent lockdown and the usage of the digital platform to
	conduct our business. Accordingly, the growth in individual loan disbursements during the first
	quarter has not been impacted as severely as in the previous year.
	While there continues to be uncertainty on the duration of the soft lockdowns and the possibility
	of a third wave we are optimistic of our ability to deliver.
	The following were the main highlights of the quarter -
	RBI not only ensured that there was adequate liquidity in the system but also that the liquidity
	is made available to all segments of the market.
	Interest rates were by and large stable.
	OTR 2.0 was announced consequent to the second wave and invocation of loans under OTR 2.0
	is to be done by September 2021. So far, we have received requests for OTR of Rs 778 crores
	(0.15% of the loan book).

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HDFC Limited

August 02, 2021

ECLGS 3.0 was announced for certain stressed sectors wherein credit upto 40 percent of the loan could be provided in cases where the account was upto 60 days past due as at February 29, 2020. As of date, we have received requests for loans upto Rs 266 crores under ECLGS 3. (just 5 bps of our loan book).

Let me now quickly summarise the progress of our business through the quarter.

During the quarter ended June 30, 2021, individual loan disbursements grew by 181 percent over the corresponding 1st quarter of the previous year.

Growth in home loans was seen in both, the affordable housing segment as well as high-end properties.

Our individual loan approvals for the quarter ended June 30, 2021, were higher by 149 percent compared to the 1st quarter in the previous year.

As you are aware in the previous year due to the severe lockdown business had come to a standstill for a couple of months and the opening up happened towards the end of May 2020. Accordingly, Q2 of the previous year is a better reference point to look at performance.

Despite the impact of the second wave in April and May of the current year, individual loan Approvals and Disbursements in Q1 of this year were 96 and 97 percent respectively of the disbursements during the second quarter of the Previous Year.

While disbursements during April and May of the current year were somewhat impacted, business has reverted back to normal in the months of June and July.

As at July end we have crossed the disbursements done during the first half of the previous year.

In the four months ending July 2021 we have achieved 108 percent of the disbursements of the first half of the previous year.

July 2021 disbursements are the highest ever in a non quarter end month.

Disbursements in July 2021 was 14 percent higher than June 2021 and June 2021 was 79 percent higher than May 2021.

July 2021 disbursements are 64 percent over the same month in the previous year.

88 percent of new loan applications during the quarter were received through the digital channels.

During the first quarter, we sold loans aggregating to Rs. 5,489 crores as compared to Rs 1,376 crores in the corresponding quarter of the previous year.

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HDFC Limited

August 02, 2021

These loans were all assigned to HDFC Bank pursuant to the mortgage sharing agreement with the Bank.

Individual loans sold in the preceding 12 months amounted to Rs 23,093 crores as compared to Rs 18,273 crores in the previous year.

Our individual loan book increased to Rs 3,76,020 crores - a growth of 14 percent over the previous year. In addition to this, the loans securitised by the Corporation and outstanding as on June 30, 2021 amounted to Rs 73,471 crores. HDFC continues to service these loans. Individual loans outstanding on an AUM basis amounted to Rs 4,49,491 crores.

Individual loan growth on an AUM basis was 14 percent. If the loans amounting to Rs 23,093 crores had not been sold, then the growth in the individual loan book would have been 22 percent.

With regard to the non individual portfolio, we have seen a decline during the quarter. There are several reasons for this.

Over the last 12 months we have seen large prepayments on our LRD portfolio from the REITS issues which has had an impact on the growth of the non individual book.

Also, construction activity significantly slowed down particularly in the months of April and the first fortnight of May. This led to a slowdown in disbursement in the CF book.

Consequent to this, we had a degrowth in the non individual loan book. However, we have a strong pipeline of some large proposals which we expect to disburse over the coming quarter. We expect a positive growth for the year.

During the quarter, our overall loan book increased to Rs 5,00,490 crores.

The Assets Under Management (AUM) as at June 30, 2021 amounted to Rs 5,74,136 crores as compared to Rs 5,31,186 crores in the previous year.

Prepayments on retail loans, on an annualised basis, were lower at 8.2 percent of the opening loan book as compared to 10.3 percent in the previous year.

The average size of individual loans for the quarter ended June 30, 2021 stood at Rs 30.9 lacs compared to Rs 29.5 lacs in the FY21.

Our thrust on affordable housing loans continued unabated. During the quarter ended June 30, 2021, 33 percent of home loans approved in volume terms and 14 percent in value terms were to customers from the Economically Weaker Section (EWS) and Low Income Group (LIG).

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HDFC Limited

August 02, 2021

The average home loan to the EWS and LIG segment stood at Rs 11.1 lacs and Rs 19.3 lacs respectively.

If we break up the loan book outstanding on June 30, 2021 on an AUM basis into different categories then individual loans constitute 78 percent of the total book, as compared to 74 percent in the 1st quarter of the previous year.

Construction finance constitutes 10 percent, of the total loan book, Lease rental discounting loans constitute 6 percent of the total loan book while corporate loans also constitute 6 percent.

If you were to look at incremental loan book growth and split that growth between individuals and non-individuals, then for the quarter ended June 30, 2021, the entire growth is on account of the individual loan book.

Total loans sourced from distribution channels is 99 percent of which -

HDFC Sales is 53 percent

HDFC Bank is 29 percent

And Third Party DSAs is 17 percent.

Thus, 83 percent of HDFCs individual business was sourced directly or through our associates.

The Emergency Credit Line Guarantee Scheme (ECLGS) was further extended during the quarter to mitigate the economic distress caused by the second wave of the pandemic.

In the previous year, under ECLGS 1.0 and 2.0, the Corporation had approved an amount of Rs 2,509 crores of which Rs 1,391 crores has been disbursed by June 2021. Amounts disbursed under this facility are guaranteed by the Government.

As of date the applications received for ECLGS 3.0 amounts to only Rs 266 crores.

The Reserve Bank of India permitted a one-time restructuring of loans under its resolution for COVD-19 related stress.

In this regard and as informed last quarter, the aggregate amount of loans for which restructuring has been implemented under OTR 1.0 was Rs. 3,704 crores (0.7 percent of the loan book).

In the current quarter, OTR 2.0 was announced in respect of individual and small business loans which are standard as on March 31, 2021. OTR 2.0 is currently in the process of being implemented and the last day of invocation is September 30, 2021. As of date we have received applications for restructuring of loans amounting to Rs 778 crores (0.2 percent of the book).

Out of the loans under OTR 1.0 and 2.0, 38 percent are Individual loans and 62 percent are non- individual loans.

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