Tag - HDFC

Real Estate demand growth driven by rising income levels – HDFC

Update on the Indian Equity Market:

On Monday, markets plunged sharply in continuation to Friday’s fall. After the flat start, weak global cues and updates on the new COVID variant started weighing on the sentiment as the day progressed.

NIFTY ended 1.7% down at 16,912. IT (-2.7%), HEALTHCARE(-1. 9%), and PHARMA (-1.9%) were the top losers and there were no sectoral gainers. The top losers were INDUSINDBK (-3.7%), TATACONSUM (-3.4%), and BAJAJFINSV (-3.3%) while UPL (+0.4%) was the only stock in green.

Real Estate demand growth driven by rising income levels – HDFC

Edited excerpts of an interview with MR. Keki Mistry, Vice-Chairman and Managing Director of Housing Development Finance Corporation (HDFC Ltd) with CNBCTV18 on 3rd December 2021:

  • On new norms on recognition of Non-Performing Assets for Banks and NBFCs issued by RBI: He stated that a few years back NPA were recognized on a 180 days basis that got changed to 90 days. According to the new guidelines published by RBI, once the account is recognized as NPA, Banks won’t be able to upgrade it to standard assets till the whole loan has been repaid. Earlier, an NPA account, after payment of 1-2 installments could be categorized as a standard asset. Temporarily, there will be limited impact on Profit and Loss Account for most of the companies including HDFC but the reported Gross NPAs number will look higher for next 3-4 quarters.
  • The real estate market has steadily picked up after the slowdown in the 1HCY21 due to the COVID-19 pandemic and the resultant lockdowns.
  • Mr. Mistry thinks that the interest rates have been bottomed out but he doesn’t see that having a significant impact on the market.
  • He thinks that the runway for growth is across the country. In the period from CY17-CY20, the demand was largely focused on the tier-II tier-III towns in the outskirts of big cities. In the last one or two years, cities like Delhi, Mumbai, Bangalore, Pune, Hyderabad, and Chennai are reporting strong growth. A pickup in demand in the metro cities has been witnessed recently.
  • Mr. Mistry attributed the rise in demand to
    • Income levels rising in the past few years. He explained that the real estate prices have been stable but the income levels grew on an average by 8% per annum in the last 4 years resulting in cumulative 34-35% growth in income levels.
    • Low-interest rates
    • Feel good factor: He stated that the malls, hospitals, shops, hotels, and restaurants are full as the feel-good effect is driving and keeping people motivated.
    • The myth that there is oversupply in Mumbai and Delhi markets has disappeared, so people are not waiting for property rates to subside anymore.
  • The HDFC chief believes that affordability has increased in the market and it is an opportune time to buy real estate. To supplement this, he said that October-21 saw the highest level of loan disbursements by HDFC. This indicates strong demand and he expects it to sustain for a long time.
  • Mr. Mistry also believes that the lending rates have bottomed out but he does not expect the RBI to start raising rates in a hurry. But throughout the next 6-12 months rate hike is possible. It depends a lot on global factors like inflation, oil prices, and other factors which are not within our control.
  • The yield curve, according to him, has been steep due to excess liquidity in the system. This has been reflected in the demand seen in the high-end market which has seen a pickup after being subdued from CY17 to CY20.

Asset Multiplier Comments

  • Looking at the macro growth drivers, well-diversified loan portfolio, and adequate liquidity on hand our outlook over the long term remains positive on HDFC Ltd.
  • We think the new rule would impact in the near short term but in long term we expect the NPA levels to normalize. Stable collection efficiency and provisions higher than regulatory requirements will help support the company to maintain a healthy Balance Sheet.

Consensus Estimate (Source: market screener and investing.com websites) 

  • The closing price of HDFC Ltd was ₹ 2,769/- as of 06-December-21. It traded at 4.2x/3.9x/3.5x the consensus BVPS estimate of ₹ 659/705/781 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 3,251/- implies a PBV multiple of 4.2x on FY24E BVPS of ₹ 781/-.


Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


Demand for home loans will rebound – HDFC

Update on the Indian Equity Market:

On Tuesday, Nifty ended marginally lower at 9,029. Among the sectors, Metal (+2.7%), Auto (+1.5%), and Realty (+1.2%) were the top gainers. IT (-1.9%), Pharma (-1.2%), and Media (-0.2%) were the only losers. JSW Steel (+5.9%), Eicher Motors (+5.7%), and Titan (+5.0%) led the gainers while Bharti Airtel (-5.9%), Bajaj Finserv (-5.1%), and TCS (-3.5%) ended in the red.

Excerpts from an interview with Mr. Keki Mistry, Vice Chairman & Chief Executive Officer, HDFC with BloombergQuint on 25th May 2020:

  • HDFC is offering a moratorium to all the customers. 79 percent of the borrowers have said they do not need it. A higher number of non-individual borrowers have opted for the moratorium compared to the individuals.
  • Since some developers are facing liquidity issues due to the lockdown, HDFC has to give them moratorium. The large developers are able to service their loans, with or without sales. Small and mid-sized developers have asked for the moratorium.
  • HDFC has not slowed down lending and is looking for fresh lending opportunities. In Mumbai and Madhya Pradesh, the offices are not open leading to slower disbursements. The offices which are currently open are working at 33 percent capacity and there will be a slowdown in disbursements during 1Q FY21. HDFC expects that 2Q FY21will be better than 1Q FY21 and consequently, 4Q FY21 will be back to 85 to 95 percent of normal levels.
  • Owning a home continues to be an important aspect of the lives of Indians. The lockdowns imposed in the aftermath of the virus outbreak has forced people to work from home, relying on internet connections and video conferencing apps. This trend could push people to buy larger homes or ones with a separate study room. Joint families could split into smaller units going forward meaning more people will be buying their own houses.
  • In the short term non-performing loans could rise but in the medium-to-long term, NPLs are expected to reduce. They have continued to tweak the credit underwriting model given the current situation.
  • In the affordable housing segment, the average loan size is Rs 17.7 lakh and most of the customers are salaried customers and not self-employed. The risk from job-losses or income cuts and its impact on NPLs is probably higher than in the pre-crisis period. There are co-borrowers to a mortgage, so if one person loses a job or faces a salary cut, they generally still do not default.
  • HDFC will be looking for opportunities to raise money. The liquidity level has been increased from around Rs 6,000 crores last year to around Rs 30,000 crores this year. HDFC has been recently sanctioned Rs 750 crores loan by the National Housing Bank recently.

Consensus Estimate: (Source: market screener website)

  • The closing price of HDFC was ₹ 1,506/- as of 26-May-2020. It traded at 2.8x/ 2.6x the consensus book value estimate of ₹ 531/ 574 for FY21E/ FY22E respectively.
  • The consensus target price of ₹ 2,406/- implies a PB multiple of 4.2x on FY22E BV of ₹ 574/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


No need for retrenching employees, call on pay cut will be taken soon: Keki Mistry, CEO of HDFC

Update on Indian equity market:

Indian markets opened on Wednesday higher but erased all the gains towards the end as Nifty closed 69 points lower at 9,196. Among the sectoral indices, six out of 11 indices closed in the red led by FIN SERVICES (-2.8%), BANK (-2.2) and PVT BANK (-2.1%) whereas FMCG (4.2%), REALTY (1.8%) and MEDIA (0.9%) were the highest gainers.  Within the index, KOTAKBANK (-5.7%), HEROMOTOCO (-4.7%) and BAJFINANCE (-4.4%) led the index lower while UPL (8.0%), HINDUNILVR (5.4%) and BRITANNIA (5.2%) closed the day higher.

Edited excerpts of an interview with Mr Keki Mistry, CEO, HDFC published on CNBC TV18 on 14th April 2020:

  • Sharing his views on the announcements made by PM Modi on 14th April, Mr Mistry said that there will be calibrated reopening of the economy. Certain industries which are very critical and necessary for the smooth functioning of the economy might be a part of this calibrated reopening starting from 20th
  • According to him, the critical thing at this point is to ensure that there is enough liquidity in the system.
  • He made a request to the Reserve Bank of India (RBI) to provide funding to the National Housing Bank (NHB), which is 100% owned by the government. Through the NHB, the RBI can provide the funding to Housing Finance Companies and something similar could be done for Non-Banking Financial Companies.
  • According to him, certain sectors of the economy like hospitality, hotels, airlines, real estate have been badly hurt by the crisis. They need some sort of a special stimulus.
  • Commenting on the cost-cutting measures, he said that the salary cost is not a major expense for the company as about 1.5% of the total expenditure for HDFC is spent on salaries.
  • The company currently has 3,500 employees and he believes that there will be no need to look at retrenching employees. Pay cuts are being studied on a day to day basis and the company will come out with something in the coming days.
  • He said that retrenchment and pay cuts could be a problem in certain sectors. However, in the financial sector, retrenchment may not be a major concern.

Consensus Estimate: (Source: market screener, investing websites)

  • The closing price of HDFC was Rs 1,594/- as of 15-April-2020. It traded at 3.2x/ 2.9x/ 2.7x the consensus Book Value estimate of Rs 506/ 544/ 598 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 2,594/- implies a PB multiple of 4.3x on the FY22E BV estimate of Rs 598/-