Last year witnessed interesting developments across the global economy. After a long spell of stagnation and de-growth, green shoots of economic upswing are appearing for the world economy. According to the International Monetary Fund, global economic activity led by emerging markets and developing economies should pick up pace in FY 2017 and FY 2018. Asian economies led by India are picking up speed as policy and consumption-led tailwinds have given businesses a positive fillip. Indeed, India with a 7.1% growth rate in FY 2016-17 along with China’s growth rate of 6.7% for 2016 and promising to continue the trend into FY 2017-18 will remain the epicentre of action. In India, a fundamental premise of optimism stemmed from its strong socio-economic reforms that were peppered with events that will reset our country’s economic direction in a transformational manner. This milieu enabled us to deliver yet another year of sustainable yet profitable growth.
In the face of challenges to domestic growth accross countries, doubts on the very concept of globalization have surfaced. This has led to demand for reversing progress towards a barrier free world trade.The new world, however, has come a long way under globalisation and collaboration and have redefined the modern economy. Technology has dropped the barriers irreversibly and disruption through innovation is the norm which is rewriting the very rules of conducting business. Businesses which leverage innovation to deliver the best solution in the ever-changing global arena will triumph.
In this backdrop, relentless pursuit of sustainable and inclusive growth and redistribution of wealth are of critical importance if the destination of a global village that the world embarked under globalisation is to be met. We at DHFL, will remain committed to promoting inclusiveness and sustainability in our business and play a positive role as a corporate citizen.
I am proud to say that the vision our Founder Chairman Late Shri Rajesh Kumar Wadhawan laid out three decades ago and DHFL’s current business direction are in sync with the Government’s larger goal of financial inclusion for the weaker sections of society and dwelling ownership for every Indian. At the centre of our Honourable PM Shri Narendra Modi’s clarion call for Sabka Saath Sabka Vikas, is our valued Lower and Middle Income (LMI) customers. GST, too, will usher in federated revenue collection uniformity and drive India towards a single, formal economy.
DEMONETISATION TO DIGITISATION
Demonetisation has been one of the boldest moves taken by the Government in recent times. I believe it will prove to be a positive development bringing a greater share of financial transactions to the formal system, strengthening credit growth and enabling wider financial inclusion. The financial services sector has a tremendous upside to capture from the move, especially for businesses like DHFL that focuses on providing financial credit to the unbanked. Given DHFL’s robust presence in Tier II & Tier III cities and towns and deep network in rural India, we are best suited to service the additional demand from borrowers entering the formal financial system for the first time.
Digitisation initiatives introduced after Demonetisation has had significant benefits; having built a robust proprietary understanding of fiscal creditworthiness of the large underserved segments. Digitisation will ensure that a vast population will step into the official banking circuit. This has opened additional opportunities for DHFL to attract new customers having already established last-mile connectivity to reach underserved and unbanked Indians both physically and digitally.
A HOME TO OWN FOR EVERY INDIAN- ENABLING LANDSCAPE
The affordable housing finance sector has gained central focus owing to the Government’s vision of housing for all by 2022. With the Government granting infrastructure status to companies providing affordable housing, this sector has become an attractive investment opportunity. According to a report, since the Pradhan Mantri Awas Yojana (PMAY) aims to provide 20 million houses in three phases over FY 16-22, this will directly benefit the economy by around INR 15 trillion over a 7-year timeframe; 95% of the total demand deficit is coming from Economically Weaker Sections [EWS] and LIG (Lower Income Group) & MIG segments. Your Company stands to benefit from the Government’s Smart City mission that will create additional demand for urban affordable housing loans.
The policy prescriptions of the Government validate our belief and
Founder’s vision of building a business on the foundation of social empowerment. According to Government data, PMAY has so far received over 9 lakh applications and I am happy to share with you the fact that a majority of the customers we source will qualify for the government’s interest subsidy for affordable home loans. Indeed, DHFL is proud to contribute to nation building in a purposeful yet profitable way.
Besides addressing demand, recent policy decisions strategically reinforce supply side as well. With foreign participation (FDI) made easier in affordable housing, reputed global investors have joined domestic players in evincing interest in this sector. Our investors are now able to participate in India’s LMI housing growth story in a meaningful yet sure manner.
Another step of significance in building consumer confidence is the implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA). This has led to a more customer-focused approach and time bound delivery in the housing sector. This will lead to professionalization of the affordable housing sector.
BUILDING A CUSTOMER-CENTRIC, PHYGITAL ORGANISATION
We believe digital disruption in the fintech space is a great opportunity for us. Like a whole generation of Indians who bypassed the land phone and the PC era to leapfrog to mobile Internet, technology-led innovations help us bypass physical infrastructure-led traditional growth models to reach customers. Smart technology will complement our intuitive and inventive organisation culture that drives us to do things differently. At DHFL, we are moving towards becoming a ‘Phygital’ customer-centric organisation. We are creating a unique integrated ecosystem of digital and physical consumer touch points for our customers to seamlessly interact with us in their preferred environment.
Our people form the backbone of our business. Today, the DHFL franchise is serving as a common platform for our integrated financial offerings to different segments of our society. In such a scenario, professional talent is crucial to sustain our momentum. During the year, we continued to reinforce and build a healthy leadership pipeline across junior, middle and senior level employees. My belief that an organization is as good as its people will hold good for ever in any fast-changing environment. As we grow - in size, business lines and across geographies -we want to build a unified culture that is customer-centric and conducts itself with simplicity, entrepreneurial zeal and serves the larger cause of the Nation.
For the BFSI sector, fintech driven innovations are a key learning experience. Futuristic technologies like Artificial Intelligence (AI), predictive analytics, bot-based customer services and mobile apps are set to transform traditional business models and customer touch points. Across our various businesses of lending, investments, protection and new business areas a single-customer dataset can help us mine data and reach out to garner a larger share of the customer wallet in a cost-effective yet speedier way.
THE NEXT STEP
We are today not only a leading player among HFCs but also one of the largest in securitisation of home loan portfolios to banks and other financial institutions. We would like to build on the strength of our people, process and technology in the home loan origination and emerge as the largest home loan Originator. We will harness the growing potentials of the affordable home loan segment in this strategy, which is our forte.
PREDICTABLE PERFORMANCE, PURPOSEFUL PROFITS
During the year, DHFL retained CARE’s highest AAA (Triple A) credit rating and our asset base is fast growing towards Rs 1 lac crore . Despite various macroeconomic challenges, your Company delivered a robust performance with a 21.33% revenue growth of Rs.1,557.24 crore for the year ending March 31, 2017. Profit before tax and exceptional item stood at Rs.1,402.39 crore, an increase of 27.24% on a YoY basis. More importantly, our loan portfolio grew at a healthy 20% to Rs.83,559.92 crore as on March 31, 2017.
UNLOCKING VALUE TO STAKE HOLDERS
Our decision to sell the entire equity stake in the Joint Venture entity DHFL Pramerica Life Insurance Co. Limited to our wholly owned subsidiary was aimed at value creation for all stake holders. It added to DHFL’s net worth and book value;and will ensure all our expansion plans are capitalized fairly. The enthusiastic response to the two public issues of Non-Convertible Debenture (NCDs) of Rs.14,000 crore -oversubscribed on the very first day across all three segments of Retail, High Networth Individuals (HNI) and Qualified Institutional Buyers (QIB) - is testimony to the trust we enjoy among our stakeholders.
Our strategy has always been to invest in ventures that bear fruit in the long run. DHFL has been consistently investing in avenues which have similar potential to create value. With access to more efficient source of funds, invaluable customer trust, better financial performance and best-in-class management standards, we are building DHFL into a preferred financial services brand. We continue to look for synergies with complementary businesses like micro-finance, asset reconstruction, fintech platforms and similar enablers that will help us expand our retail reach and provide integrated financial solutions to customer segments for a variety of needs under one roof.
Today, we encompass the entire financial life cycle of the consumer and not just part of his personal borrowing journey (lending) for affordable housing. Thus, financial services for protection (insurance), higher studies (education loans), wealth creation (asset management) and entrepreneurship (SME loans) are part of our bouquet of offerings, this in turn will create significant value for the company.
COLLECTIVE LEADERSHIP THROUGH WGC
DHFL is the flagship Company of the Group with growing ambition in financial services sector domestically and in the global arena. Wadhawan Global Capital Pvt Ltd. , our Promoter Group entity is set up to harness our collective business strength and leadership. At a group level we manage around $18.6 Billion of Assets (AUM) through our lending, Asset Management and Insurance businesses. We have also partnered with leading financial institutions such as International Finance Corporation, Washington and Prudential Financial Inc., United States, in transforming the lives of millions of customers across the world.
INVESTING IN IMPACT-LED CHANGE- THE CSR WAY
With its ‘Changing Rules, Changing Lives’ motto, DHFL has picked up the gauntlet to impact the lives of the less fortunate. Our focus is equally on Corporate Social Responsibility (CSR) programmes with clear objectives that deliver sustainable social outcomes. Our CSR work in early childhood care, skill development, drought mitigation and financial literacy is delivering impactful results at the ground level. We are partnering to upgrade the infrastructure at Anganwadis that provide quality pre primary education coupled with nutrition, safe drinking water and sanitation facilities to over 30,000 mothers and children across 1000 units . Our skill development programme is aligned to the Government’s Skill India Mission to impart hands-on training in industrial skills to young people. We have enabled gainful access to employment to nearly 1000 youth in BSFI and Construction industries in just one year. We are also involved in drought mitigation efforts to solve the water scarcity problem in rural India. Our CSR efforts remain an integral part of our ethos, fulfilling critical societal needs with measurable outcomes.
TOWARDS FINANCIAL EMPOWERMENT
I would like to thank each one of you for contributing to our Founder’s vision and building DHFL into a successful and meaningful entity. With the Government making financial inclusion and housing a priority, your Company will continue to deliver profitable growth and contribute to nation building by aligning to the larger cause of the country. With smart technology, professional business conduct, world class partners and the resolve to enable financial access to the most vulnerable sections of society, your Company is well poised for future growth.
I firmly believe that the developments of the past year ‘will change the way Indians spend and live in the future.’ This will lead to an accelerated evolution and a transformational business landscape wherein DHFL will continue its contribution in the country’s march towards shared prosperity.
Chairman & Managing Director DHFL