With RERA, the individual home buyer will get more confidence in buying a property, said Keki Mistry, Vice Chairman and CEO, HDFC.
The housing finance major, Housing Development Finance Corporation (HDFC) reported an in-line set of fourth quarter earnings with asset under management (AUM) growth of 16 percent and asset quality remaining stable.
The standalone profit during January-March quarter fell 21.6 percent to Rs 2,044.20 crore compared with Rs 2,607.05 crore in same quarter last fiscal. Income from operations jumped 10 percent year-on-year (up 4 percent quarter-on-quarter) to Rs 8,453.41 crore in January-March quarter.
Individual loan book grew by 13.6 percent year-on-year to Rs 2.04 lakh crore and non-individual loan book increased 16.1 percent to Rs 92,039 crore.
Speaking to CNBC-TV18's Ritu Singh, Keki Mistry, Vice Chairman and CEO, HDFC said the number of loan applications have been consistently increasing post demonetistaion. So, looks like demonetisation related slowdown is behind, he said.
On the HDFC Life-Max-Life merger, he said they were waiting for approval from IRDA. He hoped the IRDA issue would be resolved by June 30. However, if the merger structure was not approved, only then the board would look at restructuring the deal, he added.
Below is the verbatim transcript of the interview.
Q: Can you tell us about the performance of the company in the quarter gone by?
A: We sold 9 percent of the equity in HDFC Life to Standard Life last year and that brought a profit of Rs 1,530 crore odd. If you remove that profit, remove that one-off sort of transaction, then the profit for the quarter would have been higher by 14 percent. Then you should also remove the excess provision that we created. So, whenever we have these one-time profits, our policy is that 30 percent of the profits that we make, we create a special provisioning. So, if you remove the profit and if you remove the provisioning, then the growth in the profits was 14 percent.
Q: Take us through the loan growth you saw in this quarter, both in the individual and non-individual segment. Is it safe to say that all the demonetisation related slowdown is behind and a recovery is already visible?
A: I would believe so. First of all, in my view, there never was really that much of cash in the real estate market, at least in the primary market. However, with every passing month, we have seen that the amount of new applications that we are receiving, that number keeps increasing, that value keeps increasing. So, November-December saw a slowdown, January was 21 percent higher than December, February was 16 percent higher than January, and March was as much as 44 percent higher than February.
Q: On a more macro picture, now that Real Estate Regulatory Authority (RERA) has come into effect, I know state wise the implementation may vary, but overall how do you see this changing the landscape for the real estate sector?
A: I think what will happen is, with RERA individual home buyer will get more confidence in buying a property. RERA brings in much greater transparency, it brings in much greater disclosure. It may slow down a little bit of construction activity in the very short-term, but I think that impact is very short-term and is needed for the system.
Q: The Max Life merger which has been pending, we understand the latest is that IRDA has asked the Attorney General for their views on the matter. What is the next step from here?
A: Very honestly we are awaiting IRDA approval. We understand that IRDA has sorted legal opinion from the Attorney General on the structure of the transaction. So, the way the transaction was structured, just to recap, was that our merger was to be with Max Life. Max Life is a subsidiary of Max Financial, and Max Financial is a listed company. The way it is structured, which was envisaged was that Max Life would merge into Max Financial, the combined entity would merge into HDFC Life and then the non-Life business would be dropped off.
However, these were not mergers in true sense of the word. These were just structures, steps towards attaining the final merger and these are nanosecond mergers. So, the real merger was only between the HDFC Life and Max Life.
In the opinion of IRDA, it wanted a legal opinion because there is a section in the Insurance Act, which says that an insurance company can only merge with another insurance company, whereas here even for that nanosecond an insurance company is merging with non-insurance company. Our lawyers are very confident that the structure that has been suggested by them is perfectly legitimate, perfectly legal, and therefore hopefully the Attorney General’s opinion will be positive.
Q: Have you already shared your views with the IRDA?
A: Of course we have. However, the IRDA was seeking a legal opinion from the Attorney General.
Q: Has there been any communication by when this matter may be resolved so that you may be able to close this deal finally?
A: We hope that by June 30 this issue gets resolved. If it does not get resolved by June 30 we will have to relook at whether we should continue for more time, or whether we should look at some form of restructuring of that deal. There are ways to restructure the deal, so that there is no merger between an insurance company and a finance company.
Q: You have essentially given yourself an internal target of June 30, if not then restructure it?
A: Tentatively we are saying June, but that June can, obviously if the board feels it can get extended further depending on how we see things at that point of time.
Q: Everything else is in place, as soon as the go ahead with IRDA comes?A: Absolutely.