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HDFC Ltd.
Desai Ghosh Gupta Mallick Mittal Mugdha Rudranil Shruti Arnab Achal

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HDFCs early years

Founded in October 1977 with initial share capital of Rs. 10 crore by H.T. Parekh and first loan disbursement in September 1978 Equity contributions from International Finance Corporation (5%) , Prince Aga Khan (5%) and a public offering on the Bombay Stock Exchange Regulated by the RBI as a non-bank finance company Defined its business as housing finance rather than mortgage lending Lending was based on borrowers repayment capacity rather than secured propertys value Credit Policy was to lend no more than 25-30% of a persons income Recruited Deepak Parekh from Chase Manhattan , Saudi Arabia,

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Business Philosophy

Set-up follow-up department for dealing with delinquent borrowers instead of a recoveries department HT Parekh believer in openness and thought it was essential to earn customers trust Compared to others in the market, HDFC was a more customerfriendly . Loan approval took 6 weeks as compared to 6-12 months required by public sector banks Professional approach- rejected any application by customer who offered bribe to speed up procedure Offered free advice to home buyers about the reliability of developers and their projects. Started a Property Services Group. Launched a venture to approve and license developers projects and market them for a fee

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Funding in the 1980

1983 - $ 125 million from housing guarantee program of USAID 1988- $ 250 million from the World Banks IBRD 1989 DM 25 million from German governments KfW Borrowed in the US at a 6% US$ denominated rate, swapped out of dollars and into Indian rupees at an effective 12-13% overall cost Growth accelerated to 30-40% in the period

HDFC employees and teamwork

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Compensation

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Lower pay scales as compared to other companies 1992- 5% of the issue purchased to fund an employee trust 1994- 5?% of the issue in HDFC Bank Formula for distributing shares

Base number for everyone was decided including drivers and secretaries

For each higher level : 20% increase 2X : for 5-10 years of service 3X: for above 10 years of service

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New Business Model

In 1991 unusual increase in interest rates Dual challenge Raising wholesale funds & Lending at affordable rates Provision of a superior level of customer service by focusing on innovation Introduced loans against deposits Pioneered a monthly income plan Developed a strong network for sale of its products

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Making Use of Technology

Single Window concept for loans in 1992 Centralised back-end processing by 2000 Significantly low expense-to-asset ratio Minimal spending on advertising Concentrated more on statutory ads

8/6/12 Handling Delinquent Borrowers

Recoveries Personnel trained to understand customer psychology

Followed a well-defined matrix method to approach delinquency

Cautious about write-offs to have a low default rate to maintain its credit rating

Made loan advances to

low-income households rural population

8/6/12 The New Competition

8/6/12 The New Kids on the block

SBI with its battalion of 25000 branches LIC and GIC Housing finance(under National Housing Finance)

HUDCO ICICI ( Poaching + Direct Sales Agent+.5% lower rates)

Disposable Income Interest rates Property prices

These factors added with a low Mortgage penetration of only 1% of GDP made India a very lucrative market for Home Loans

8/6/12 The Changing Strategy

Positioned as a provider of solutions rather than only loans Aggressive Expansion of its branch and outreach system New Training programs and skill development of employees Better Service standards through Customer Tracking System Introducing the Variable Rate Housing Loan. Setting up HDFCrealty now HDFC Red.

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Thank you
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