On A Strong Footing

Good asset-liability position makes the firm stand out in a stressed environment

- Radhika Merwin

Over the past year, the liquidity crisis in the NBFC space, more so in the housing finance sector, has brought to light structural issues in the asset-liability management (ALM) of most players. Housing Development Finance Corporation (HDFC), the market leader in the home finance segment, has been able to tide over the tough times, thanks to its sound business model and steadfast discipline in ALM. The company’s ability to raise funds from diverse sources — at reasonable rates — has helped it gain market share when many other players facing liquidity crunch have lost ground.

While loan growth for HDFC has moderated over the past year — given the challenges in the real estate sector, in particular the developer segment — the performance has been nonetheless healthy. In the latest September quarter, HDFC reported a growth of 11.7 per cent in its overall loan book (excluding sale of loans to HDFC Bank), driven by a 15 per cent uptick in the retail/individual loan segment. Growth in the non-individual segment, however, remained modest at about 3 per cent as the company continued to consciously curtail some of its lending to the segment, given the uncertainty and risks in the space.

While the company’s delinquency in the individual segment has been stable, the non-individual segment continued to report stress in the September quarter, with the GNPA ratio inching up. An improvement in the non-individual segment will be key for a significant improvement in loan growth and profitability.