We plan to grow our loan book by 30% annually for the next few years. We think that Covid-19 disruption is going to be temporary.
By Ankur Mishra
Home First Finance, a financier of affordable homes, expects its loan book to grow by 30% annually for the next few years, despite the pandemic. Manoj Viswanathan, managing director and chief executive officer of the lender, tells Ankur Mishra the impact of Covid-19 would be limited to the first quarter of the current financial year. The company expects growth to catch up in the subsequent quarters. Excerpts.
What is your assessment of current wave of Covid-19. Has there been any impact on collection efficiency so far?
There is a slight impact. Some customers are saying they would like to conserve cash. This is very different from what happened during the first wave of Covid-19. Last year, there was an impact on livelihood, business, salaries and people were going back to their home towns. So the incomes were impacted, but lives were less impacted. This time, it is the other way round. While incomes are less impacted as the factories are fully running, people are busier with the Covid-19 instances in their family. So the behaviour is very different. The customers are telling us that they have the money, they will pay us but they would like to conserve the cash due to emergency expenses in the family. We believe these are not the customers who will go in the non-performing assets (NPA) category.
Considering some impact of Covid-19, what is your target for loan growth in the current financial year?
We plan to grow our loan book by 30% annually for the next few years. We think that Covid-19 disruption is going to be temporary. The impact will be limited to the first quarter of the current financial year (Q1FY22). And we will be able to catch up in the subsequent quarters.
RBI has allowed loan restructuring for individuals affected by fresh Covid-19 wave. What is your sense on restructuring requests this time?
The restructuring offered by RBI is similar to the one provided by the regulator last year. We did not offer restructuring to any of our customers last time. Out of 50,000 customers, only one or two approached us for restructuring last year. We explained to them that restructuring will not help them. Therefore, this time also we are not expecting any restructuring request.
Has there been some pressure on margins? What is your outlook?
We offer loans between 12-13% range. We have a spread of 4-5% on this rate. So there is no margin pressure due to Covid-19 and our spread does not get disturbed much.
Do you believe your home loan rate will continue to remain at 12-13% level?
I do not see any further reduction in the home loan rates at this point of time. It should remain at the same level.
How is your underwriting policy different at the time of pandemic?
We deal with customers who require more detailed assessment. These are not customers who are salaried formally. They could be working in small companies or could be earning in cash. You need a very detailed assessment for this kind of customers. So how we are using technology is that we try to validate, whatever we are learning on the ground. For example, if a customer is self-employed, we also check the data from GST portal. It makes our underwriting faster and accurate.
What is your outlook on asset quality?
We have seen that affordable housing segment customers are very resilient. A house is very dear to them. Therefore, they continue to make payments. That is why despite the pandemic, our GNPAs only touched 1.8%. This time around, the incomes are not much impacted and now we are dealing with customers who have paid during the pandemic last year. Therefore, we do not see much impact on our asset quality due to the second wave of Covid-19.
Do you plan to raise capital in near future?
No, we raised capital in the initial public offer and we are sufficiently capitalised. Our capital adequacy ratio is more than 50%. Therefore, we do not have any plans to raise capital for the next three-four years.