1/n
Interesting snippets from the shareholder letters by Mr Deepak Parekh, HDFC from FY12-20
To equity Investors: India is not a ‘top- down story; it never was & perhaps never will be
India is a ‘micro’ story
Companies underestand: Risk of not being in India> Risk of being.
Interesting snippets from the shareholder letters by Mr Deepak Parekh, HDFC from FY12-20
To equity Investors: India is not a ‘top- down story; it never was & perhaps never will be
India is a ‘micro’ story
Companies underestand: Risk of not being in India> Risk of being.
2/n
The mindset behind their lending: Hats off.
Also adds, that as India’s mortgage penetration is so low, insincere lenders tend to gain market share during great times.
For HDFC, Profitability is the focus, not market share.
The mindset behind their lending: Hats off.
Also adds, that as India’s mortgage penetration is so low, insincere lenders tend to gain market share during great times.
For HDFC, Profitability is the focus, not market share.
3/n
The Power of Entrepreneurship
When HDFC ltd started in 1977, there was no systems to lend; they created it
Indian Regulators strict norms helped us skip the real estate bubbles in the past
CERSAI was setup in 2013 to counter multiple financing against the same property.
The Power of Entrepreneurship
When HDFC ltd started in 1977, there was no systems to lend; they created it
Indian Regulators strict norms helped us skip the real estate bubbles in the past
CERSAI was setup in 2013 to counter multiple financing against the same property.
4/n
In FY13, Mr. Parekh was advising the developers to reduce inflated house prices (even in Tier 2 &3) They didn’t listen.
- Customers took loans to fund the construction when developer was willing to pay the interest, what they didn’t understand is the risks.
In FY13, Mr. Parekh was advising the developers to reduce inflated house prices (even in Tier 2 &3) They didn’t listen.
- Customers took loans to fund the construction when developer was willing to pay the interest, what they didn’t understand is the risks.
5/n
Reason for the Real Estate sector being in a slump:
- Opaqueness
- Speed Money
- Vested Iterests
- Completed lethargy on the part of the authorities in granting approvals
Housing has strong backward & forward linkages with other industries+ 2nd largest employment generator
Reason for the Real Estate sector being in a slump:
- Opaqueness
- Speed Money
- Vested Iterests
- Completed lethargy on the part of the authorities in granting approvals
Housing has strong backward & forward linkages with other industries+ 2nd largest employment generator
6/n
Developer’s problem: Land costs are 70-80% of the total cost
This is financed by NBFCs & PE or the informal sector at exhorbitant rates as Banks & HFCs are not allowed.
50+ approvals for a project & takes 3 years.
Eventually, everything is paid by the customer.
Developer’s problem: Land costs are 70-80% of the total cost
This is financed by NBFCs & PE or the informal sector at exhorbitant rates as Banks & HFCs are not allowed.
50+ approvals for a project & takes 3 years.
Eventually, everything is paid by the customer.
7/n
“Little by Little, a little becomes a lot.”
Retail deposits have increased to ₹1.25 lakh crores in the current year. Up 25% YoY (even banks faced issues)
This mixed with phenomenal reputation among wholesale lenders, helped them whether through IL&FS crisis with speed.
“Little by Little, a little becomes a lot.”
Retail deposits have increased to ₹1.25 lakh crores in the current year. Up 25% YoY (even banks faced issues)
This mixed with phenomenal reputation among wholesale lenders, helped them whether through IL&FS crisis with speed.
8/n
Housing Finance is a long term business.
The relationships with customers are long term.
The time taken to build new homes in India is inordinately long.
Why are financial results looked at with such a short term lens?
Book Value- 1977 to present: 12650x (25% CAGR)
End.
Housing Finance is a long term business.
The relationships with customers are long term.
The time taken to build new homes in India is inordinately long.
Why are financial results looked at with such a short term lens?
Book Value- 1977 to present: 12650x (25% CAGR)
End.
