A conservative approach to business helped Housing Development Finance Corporation (HDFC) to be resilient in the face of turmoil, especially in FY19, according to its chairman Deepak Parekh.
The latter half of FY19 was challenging for several sectors across the Indian economy as liquidity tightened, aversion to risk increased and consumption slowed.
As a forty-two year old company, HDFC has witnessed various market cycles and navigated through booms and busts. Each of these extreme market cycles have been different from the previous ones, but there have always been invaluable lessons learnt, Deepak Parekh said in a letter to shareholders.
HDFC’s advantage has been its access to diversified resources. It tapped into new lenders through external commercial borrowings and masala bonds. Its strength has been ability to seamlessly straddle between wholesale and retail funding. They say, “little by little, a little becomes a lot.” This best characterises the growth in our retail deposits.
In the first half of FY19, HDFC was often asked why it was not growing as aggressively as others in certain segments of the commercial real estate market. It held ground by consciously staying away from funding what we perceived were riskier assets, he said.
The nature of queries changed in the second half of the year. Market asked what is that HDFC did differently that enabled us to stay resilient and be the preferred choice in the flight to safety. Perhaps a combination of experience and adhering to our risk appetite held us in good stead, he said.
In the current environment, the company had to work extremely hard to preserve asset quality. Non-performing loans have been considerably lower than several others in the financial sector. but, the company cannot rest on these laurels, he noteds.