S K HOTA
Managing Director" Our focus so far has mainly been on Housing Loans to individuals with 90% of the loan book comprising retail home loans and over 71% lending in salaried space. "
The objective of Can Fin Homes, when it was instituted 31 years ago, was to promote home ownership and increase housing stock in the country. We continued to work towards our objective of ensuring a roof over every Indian’s head, reaching out to as many people as possible, and the noble cause continues. Our performance during the recent years is a validation of how we capitalized on business opportunities and expanded our foothold in the domestic market despite various challenges faced by the sector.
India continues in its growth story as one of the fastest growing major economies of the world. With a sustained growth rate of ~7% and backed by robust growth in the manufacturing, infrastructure and consumer goods, the country is headed for a stronger and sustainable growth rate in the coming fiscal. However, the financial sector is going through the most challenging times of recent years. An increasing number of players in NBFC /HFC market are facing the challenges of business sustainability.
The thought of India as a country where every citizen has a roof over their head, till recently, appeared to be a distant dream. However, the Government of India (GoI) has indomitably been pushing affordable housing under its flagship initiative ‘Housing for All by 2022’ and trying to turn this dream into a reality. Since the announcement of the initiative in 2015, approx. 1.53 Crore houses have been built in rural as well as urban areas under the Pradhan Mantri Awas Yojana (PMAY). Through the smart city mission under the Ministry of Housing and Urban Affairs, the GoI aims to drive economic growth and improve the quality of life of people by developing 100 cities across the country making them citizen friendly and sustainable.
As developers accepted the new market realities of GST and Real Estate (Regulation & Development) Act, 2016, the residential sector regained visibility, transparency and trust. Low and Mid-income housing clearly became the front-runner of driving the housing sector growth at the backdrop of government’s reformatory push, as more private players entered the space. A reduction in GST rates for under-construction properties and several new project launches have brought correction in real estate prices, which is advantageous for the home-buyers. Armed with the Insolvency & Bankruptcy Code, homebuyers now get the same treatment as financial institutions when it comes to recovering dues from real estate firms that go bankrupt.
Can Fin Homes is the first housing finance company to have introduced Affordable Housing Loan Centres (AHLCs) to lend exclusively in the peripheral areas of the Tier 1, Tier 2 and Tier 3 cities. Currently, we have 21 AHLCs. Since the land and building value are more affordable in these areas, lending under the Affordable Housing Loan Scheme (Urban & Rural) and the Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY) is feasible.
Our focus so far has mainly been on Housing Loans to individuals with 90% of the loan book comprising of retail home loans and over 71% lending in salaried space. Most of our borrowers are first time home buyers as evidenced by the average age of our incremental borrowers at around 40 years. We will continue to abide by our dictum to have a judicious lending mix with very gradual and calibrated foray into non-housing and non-salaried category while, our core business principle of staying a purely retail and affordable home lender for lower income group of customers would continue to be sacrosanct for us.
With new loan approvals of ₹5952 Crore and disbursements of ₹5479 Crore during the year, our loan book grew by 17% to ₹18381 Crore with a clientele base of 1.46 lakh as on 31st March 2019. Notwithstanding the macro-economic challenges and the liquidity issues surrounding the NBFC/HFC space, CFHL was consistent in its growth momentum quarter on quarter, the best quarterly growth of recent times coming in Q4FY19.
Presently, our lending norms are stringent in terms of the loan to value ratio in tune with the regulatory guidelines. Safe margins of mandatory investment by the borrowers are insisted upon as a part of our prudent underwriting policy to mitigate the risk of default. We have always been consciously conservative in our lending approach to ensure good asset quality, which is our USP. Despite an industry-wide rise in delinquency rates, CFHL could successfully hold its gross and net NPA levels at 0.62% and 0.43% respectively.
While CFHL follows a cost conscious approach to borrowing, any increase in the cost of the funds, as dictated by market conditions, will have to be leveraged by passing on the same to customers. This is the practice generally followed by all banks and peer institutions. Moreover, with the introduction of the annual reset clause effective from April 2017, the rate of interest is automatically reset on an anniversary basis, protecting both the customer as well as CFHL. Your Company is the only HFC to have introduced such a fair and transparent interest rate mechanism.
CFHL successfully migrated to Ind-AS and for FY19, it was the first audited full year accounts published under the new Accounting Standard. Accordingly, the annual as well as quarterly financials for the previous year were also realigned / restated as per Ind-AS. Major impact on P&L was on account of amortization of entire Processing Fee over the loan life. This apart, current year P&L has the impact of a higher CSR spend of Rs.2.68 Crore compared to previous year and a one-time hit of Rs.8.76 Crore pertaining to previous period tax expenses.
Notwithstanding the above, our PAT improved to ₹296.76 Crore in 2018-19 from ₹286.62 Crore in 2017-18. While Net Interest Income improved to ₹530.45 cr in the year under review, Net interest margin stood at 3.14%. The cost to income ratio was contained at 16.30%. We were able to maintain a healthy ROE and ROA of 18.16% and 1.76% respectively with asset under management (AUM) improving at a CAGR of 26% over the last five years.
In our endeavour to widen our service portfolio and revenue streams, CFHL has entered into distribution of general insurance products of three companies in addition to life, through corporate agency.
As our country marches ahead on a solid growth trajectory to complete 75 glorious years of independence, we at CFHL, remain committed to building a better India by reaching out to more home aspirants. We expect 2019-20 to be a year when many more individuals can now hope to own a home rather than living in rented accommodation.
As a strategic shift in our expansion plan, we have opened more branches in Tier-II and Tier-III cities, beyond our home turf of Southern India to provide them best-in-class financial assistance. From 110 branches as at March 2016, our network has grown to 189 branches now, spread across 21 states/UTs; and 53 out of the 65 new branches added during last 3 years are in non-metro growth centres. We have plans to add 20 more branches in potential Tier II/III cities in the fiscal 2020 as a step further in this direction.
Focus of your Company will continue to be on Affordable Housing segment while quality of assets will continue to prevail over growth. The Nation is on a mission mode to achieve Housing for All by 2022. Positive reflections of reforms like RERA and GST on the sector and the Pradhan Mantri Awas Yojna (PMAY) will be the key drivers of growth in affordable housing and as a key player in the segment, we have huge opportunities ahead of us. Finding the way forward is always challenging, but I am confident that, at CFHL, we have the vision, competency and financial strength to turn today’s opportunities into tomorrow’s success.
Our journey has been enriched by the unstinting support and guidance of our regulator, National Housing Bank, our parent Institution Canara Bank, our Board of Directors, customers, stakeholders, lenders, Advocates, Valuers, Direct selling Agents, Auditors and rating Agencies. Also, I would like to sincerely appreciate all the employees for their hard and excellent work in the current fiscal and look forward to another exciting year ahead!