For Shriram Housing Finance (SHFL), which has completed a decade of operations, the second quarter this fiscal promises to be one of the highest quarters ever in terms of disbursements, says its MD & CEO Ravi Subramanian. In an interview with Mithun Dasgupta, Subramanian says the company would not need “significant” loan restructuring going forward as the market has improved. Edited excerpts:
How is the demand for housing loans after the second Covid wave in comparison to the first one?
After the first Covid wave, a lot of pipeline transactions just went on hold from March to May. People who came into the market in June saw a huge uptake from July (2020) onwards. In the last financial year, the third and fourth quarters were very good for most housing loan players. We also did record numbers as our disbursal last year was 95% more than the previous year.
This fiscal, there was a slowdown in demands. The pick-up has not been of the same nature as last year. Nevertheless, in July (2021), the business was back to last year’s pick levels. Demand for housing has picked up. I just hope that it sustains.
What percentage of housing loan demands are coming from people who already own houses?
There is around 10-15% increase in the number of persons who are building additional rooms in their existing houses, which means that people are going in for expansion. We have also seen a lot of people, who already own a house, coming in to buy a slightly larger house and clearly expressing an intent that they would sell off the old house to meet the liabilities. That too was a 10-15% increase over the previous quarters. So, there is an increase, there is a definitive shift towards people going in for larger properties.
SHFL’s disbursements for Q1FY22 stood at Rs 221 crore, against Rs 77 crore for the same period of FY21. What will disbursements look like going forward?
Q1FY21 was a very slow quarter. April and May this year was a washout. In June, we were back to about 80% of our normal disbursal. In July, we were back to our last year’s numbers. So, we are very much back on track in June and July, which means that business has picked up significantly. My company has grown through Covid-19, in the sense that my numbers before Covid were not as high as there are now. Pre-Covid, one year was a period of investment for us.
We had started transforming the organization, started growing the book, started building the distributions. So, we were on the growth path when Covid hit us. Q2FY21 was the first time our company crossed `500 crore disbursal in a quarter. This year, in July we already clocked `225 crore disbursal, which was about 30% more than what we did in June. Thus, for the company, Q2FY22 promises to be one of the highest quarters ever, if I go by the July trajectory.
What are the factors that contributed to the growth in numbers?
We had transformed the organisation in terms of areas of focus, customers segments and the products that we wanted to launch sometime in Q4FY19. After that, we have been investing in our teams and focusing on six states in south and west, and building our books. We aspire to hit about `400-500 crore in about 24 months, which we will. Today, we are one of the largest housing finance players in terms of growth in disbursal, assets under management, profitability and the portfolio quality of the new book. The portfolio quality of the new book is roughly about 77% of our total book, which is the best in class (in affordable housing loan) today. We believe in slow and steady growth.
What was the number of loans the company restructured in the first quarter?
In Q1FY22, we restructured around Rs 72 crore of loans. In the previous quarter, we had restructured loans of Rs 58 crore. Total, we have restructured roughly 3% of our book, out of which about 1.4% was in current up to 30 days when we restructured. So, it is not that we only restructured delinquent customers and higher bucket customers, but also genuine customers who had been paying and were going through some stress.
Collections in our restructured book are also very good. In fact, in July, on the new book, roughly 99% of our customers paid one EMI at least. I don’t think that we will be restructuring anything significant going forward because the market has improved.