HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED
Extract from the DRHP Dated December 30, 2016
Page Nos. 52 – 54
OUR COMPETITIVE STRENGTHS
Key role in various Government’s schemes to develop the Indian housing and urban infrastructure sectors and a very high proportion of our Loan Portfolio is to State Governments and their agencies.
We play a key role in various Government’s schemes to develop the Indian housing and urban infrastructure sectors, such as DAY-NULM, JNNURM and PMAY-HFA (Urban), through the appraisal and monitoring of projects. Through our role of appraising projects under various Government schemes, we have built a strong relationship with State Governments and their agencies. This gives us a better chance of providing loans to those entities, whether for projects under those schemes or otherwise. As at September 30, 2016, ` 324,390.6 million, or 89.83% of our total Loan Portfolio, were to State Governments and their agencies.
In many cases, our loans to State Governments and their agencies are subject to repayment through allocations in State government budgets or recourse to alternate sources of revenue, which reduces the recovery risk of loans to State Governments and their agencies. As at September 30, 2016, ` 240,914.1 million of our loans to State Governments and their agencies, or 66.71%, were subject to various State government guarantees and the remainder was subject to some other form of security, such as a mortgage or negative lien. As at September 30, 2016, our gross NPAs for loans to State Governments and their agencies was 0.85% of our Loan Portfolio compared with our total gross NPAs of 6.87% of our Loan Portfolio. While we still need to recognise as a NPA a loan to a State government or one of its agencies if payment is overdue by 90 days or more, which has an adverse effect on our results of operations and financial position, due to the fact that most of our loans to State Governments and their agencies are guaranteed by State Governments, we generally eventually recover most if not all of the amounts owed to us under such loans and have not written off any loans in the Restated Standalone Financial Statements. When a loan moves from being classified as a NPA to a standard asset, the provisions we have made for that NPA are written back in our profit and loss statement and balance sheet and we also recognise the interest due on such loan in our statement of profit and loss.
Another advantage of lending to State Governments and their agencies is that for the purposes of calculating our CRAR, the HFC Directions on capital adequacy accord a “zero†risk-weight to such loans if they are guaranteed by a State government. Our CRAR as at September 30, 2016 was 68.07% compared with the regulatory requirement of 12.00%.
Highest credit ratings, access to diversified and lower-cost funding and ability to significantly increase our borrowings in compliance with the HFC Directions.
Domestically, we hold a credit rating of AAA, the highest credit rating, for long-term borrowings from each of CARE, ICRA and IRRPL, which lowers our cost of borrowing.
As at November 30, 2016, we met our funding requirements through the Equity Shares issued to our Promoter and from market borrowings, including tax-free bonds, taxable bonds, deposits, commercial paper, re-financing assistance from the NHB and term loans. Our relationship with the Government currently provides us with access to funds for a long-term duration and at a lower cost of borrowing. It has also enabled us to source foreign currency loans from bi-lateral and multi-lateral agencies, which diversifies our lenders. Furthermore, the GoI has permitted us to issue tax-free bonds from time to time, which are at a lower cost of interest. Our average cost of interest bearing liabilities was 7.99%, 7.70%, 7.91% and 8.43% as at September 30, 2016, March 31, 2016, March 31, 2015 and March 31, 2014, respectively.
As at September 30, 2016, we had total borrowings of ` 246,743.4 million (standalone), representing 2.85 times our NoF of ` 86,537.7 million (standalone). The HFC Directions currently permit HFCs to borrow up to 16 times their NoF. Our current overall borrowing limit approved by our shareholder is ` 400,000.0 million. This borrowing limit may be increased if it is approved by our shareholders. Therefore, we have the ability to significantly increase the amount of our borrowings and thereby increase the amount of funds we have to lend for Housing Finance loans and Urban Infrastructure Finance loans.
Established track record, profitable since inception and a strong financial position.
We have been profitable since our inception over 46 years ago, including a profit after tax of ` 3,481.9 million (consolidated), ` 7,742.8 million (consolidated), ` 7,683.2 million and ` 7,339.7 million for the six months ended September 30, 2016 and Fiscals 2016, 2015 and 2014, respectively. As at September 30, 2016, we had a net worth of ` 87,241.9 million (standalone). Our CRAR as at September 30, 2016 was 68.07%, all of which was Tier 1 capital, compared to the minimum required CRAR of 12.00% and a minimum Tier 1 CRAR of 6.00%. Our sustained performance and profitability enabled us to earn the Miniratna (Category-I Public Sector Enterprise) status, which was conferred to us in Fiscal 2005.
Each year we enter into a memorandum of understanding with our administrative agency, the MoHUPA, which sets out certain financial and non-financial targets for us to achieve in a fiscal year. The levels of achievement of these targets are evaluated against our actual performance at the end of each fiscal year. Based on the achievement of the targets set forth in the memorandums of understanding, we have been awarded a rating of excellent by the GoI for Fiscals 2015, 2014, 2013 and 2012 and we expect to be awarded an excellent rating by the GoI for Fiscal 2016.
Pan-India presence and strong relationships with State Governments and their agencies.
In addition to our registered and corporate office and research and training wing in New Delhi, we have 21 regional offices and 11 development offices, giving us a presence in the capital city of each State (except for Gujarat and Andhra Pradesh, where we have an office in Ahmedabad and Vijaywada, respectively), the major city of three Union territories and in other cities in two States.
Our regional offices are responsible for developing business and are able to sanction loans up to a certain limit. Our development offices are also responsible for developing business but they are not permitted to sanction loans. We believe our pan-India presence has enabled us to develop strong relationships with State Governments and their agencies.
Experienced senior management team and a large pool of skilled and professional employees.
Members of our senior management team, which includes our Senior Management Personnel, have an average of 23 years†experience in the finance industry and have been associated with us for an average of 21 years. For further details see “Our Management†on page 148.
As at September 30, 2016, we had 852 full-time employees with diverse qualifications in areas such as finance, economics, architecture, engineering, law, planning and designing, and sociology. This large and diverse pool of talent enables us to better appraise loan applications, monitor and recover loans and raise funds.
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