In an interview to CNBC-TV18, Kapil Wadhawan, chairman and managing director, Dewan Housing Finance Limited (DHFL) shares his views on the company's fund raising, growth plans and expectations from the Union Budget.
Below is the verbatim transcript of Kapil Wadhawan’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: We wanted to know about the qualified institutional placement (QIP) and the fund raising undertaken by the company? We do understand that it is open at this point in time how much are you looking to raise and how much is possibly the interest been at this point?
A: It was open till this morning. We are happy to announce that we have successfully, after receiving a strong overwhelming support from the global investor community, closed the QIP issue for Rs 130 million. The base issue size was kept at Rs 100. We obviously received strong support which led to over subscriptions and we decided to retain another Rs 30 million over the Rs 100 million base. So Rs 130 million we have close the issue and that is the current status.
Anuj: How much is your equity dilution because of this QIP and what would be the proceeds used for?
A: Proceeds are to supplement our loan growth going forward. We have been growing at fairly brisk space in the last few years. Whilst the base level disbursements numbers as well as the loan book growth has been inching up. We are fairly optimistic that this money which we have raised will be good for at least the next three years for taking our loan book assets on the management to almost Rs 100 thousand crore.
In terms of dilution this equates to 12.3 percent dilution thereabouts on the current market cap. It is a significant raise; it is probably the largest raise that we have down in the last couple of years for ensuring strong growth for our home finance business.
Ekta: What sort of interest you saw from investor’s domestic as well foreign?
A: Whilst we had significant interest from the domestic investors as well and they participated, but the foreign institutional investor which predominantly accounted for and the long only funds accounted for nearly 90 percent of the investments. There was an extremely overwhelming support and response and that is showcased in the oversubscriptions that we received on this money raise. Initially the plan was to raise about Rs 500 crore which obviously we up scaled the base level book size to about Rs 100 million. However, post the response that we got we thought of retaining about Rs 30 million of that and close the issue.Anuj: What kind of loan growth can be expect now from Dewan Housing in last quarter it was around 20 percent or so?
A: Over the next couple of years we see a 20 percent loan growth to be a sustainable growth rate because we have been growing at 40 percent plus which is way above what the industry has been growing at. Today our average disbursements as well as approvals are up significantly so this year we will end up with about Rs 20,000 crore of loan books disbursement, fresh disbursements. So, it was 20 percent growth from hereon will be sustainable and looks sustainable for next couple of years. Specially looking at the government’s focus on affordable housing and the expectation that they have from the Budget.
Ekta: What will it take your capital adequacy ratios (CAR) to now? You mentioned that you do not need funds for the next three years as well?
A: We were sufficiently capitalised even before this fund raise. Our capital adequacy ratio was in the range of 15.50 percent as against 12 percent requirement from the National Housing Bank (NHB). Post this raise this CAR is going to move beyond 20 percent which is quite significant and most of it is going to be tier-I capital.
Anuj: You have also applied for a small bank licence, incase you were to get that would you require more capital? Would you be going in for another round of fund raising?
A: It is too early to call, firstly we will be extremely overwhelmed ourselves if Reserve Bank of India (RBI) was to consider us worthy and give us the licence. If at all we do it is going to be still two years before we get down to doing the implementation or converting ourselves into a banking entity. For now we are sufficiently capitalised and even if we do not get the licence we are on our way to where we could have been at.
Ekta: What exactly is the expectation for affordable housing from the Budget according to you? Which would be the top three things which would boost affordable housing which is a realistic expectation as well and how would it possibly help you in the next financial year possibly in loan growth?
A: We have been a low and a middle income segment player for almost 30 years now and have some leadership position there in the tier-II, tier-III geographies in the country. Now clearly the tax exemption moving up from Rs 1,50,000 to 3,00,000 is a realistic expectation considering that prices have moved up. The cost per unit that is the cost of the house has moved up in those locations so effectively the average ticket size of the loans has also consequently moved up. We are looking at raising the exemption limits.
Second is one stamp duty, stamp duty is still continuous to be a big impediment especially in the smaller cities and towns. In some states for example it is as high as 16 percent. Taking affordable housing outside the ambit of those high stamp duty rates will surly reduce the cost associated with owning a home.
Thirdly most importantly are interest rates and we of hope that through strong fiscal prudence in this Budget RBI reacts positively and starts reducing interest rates because that reduction in rate is going to go a long way more than what you would, when it comes to stamp duty or tax exemptions.
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