Dear Members A Year of Fulfillment
FY 2017-18 was a defining year for DHFL both in terms of financial performance andstrategic growth. To all our stakeholders crossing the Rs. 1 lakh crore mark in AssetsUnder Management (AUM) is a matter of immense pride and a great milestone to recognise andcelebrate. Looking back at the journey that began 34 years ago a humble beginning mountedon a profound vision of the Founder to enable homeownership for every needy Indiantranslated into a fulfilling achievement. Needless to say very few Institutions sharesuch an accomplishment of building scale on small value loans. This accomplishment haslent us a new strength that has set us on the path of a larger vision of making the DHFLBrand a household name.
We are committed to further strengthening our capabilities that allow us to servevarious financial needs of our customers offering not only home loans but alsoprotection and security for a better future.
Building on our Founder Late Shri Rajesh Kumar Wadhawan's Vision we stay committed toenabling inclusive growth as a thrust of our business objectives and thus contribute to amore equitable world.
The Indian Economy
Indian businesses have successfully coped with numerous policy-led realignments and thefinancial services sector has been witnessing regulatory-led credit quality changes whichwill enable a secured future for the market.
Compared to the global scenario the India story remains buoyant and holds significantpotential. Firm government reforms businesses adjusting to transformational policychanges like demonetisation GST RERA etc. and increased spending on welfare andinfrastructure needs gels well with the revival of India's growth theme. In FY2017-18 India grew by 6.7 percent and the IMF growth forecast is 7.4 percent for FY2018-19 and 7.8 percent in FY 2019-20. It is noteworthy that China's growth in FY 2018-19will be 6.8 percent making India regain the crown of the fastest growing country amongemerging economies.
The World Economy Gathering Speed
According to the International Monetary Fund (IMF) the world economy is gatheringspeed. To make this gain sustainable shared priorities across economies which includestructural reforms and working towards inclusive growth models need to be implemented.The IMF report mentions that 2017 saw the best global growth in seven years having grownby 3.7 percent. While the growth is broad-based notable upward surprises in Europe andAsia contributed to the record numbers.
Events around the world in the past year demonstrate a growing willingness of thepolitical leadership to solve geopolitical and trade-related conflicts through debate anddialogue. This approach of world leaders across politics businesses and regulatoryaffairs to find solutions to systemic macro-economic imbalances by sitting across thetable bodes well for a more equal world. That said there are sporadic threats to theworld economic order due to country-led populist measures ambitions of regional dominanceand imbalanced growth within and across economies.
In the financial sector global growth is showing signs of picking up with enhancedconsumer sentiment. The year also saw global financial institutions spending increasedtime either on meeting risk and governance-led regulatory demands or consolidating orshedding divisions for operational efficiency. Simultaneously new-age fintech start-upsare disrupting traditional forms of financial services delivery. The Indian growth storyespecially in the housing finance sector remains robust.
Affordable Homes Create an Equitable World
Uneven economic growth results in increased human conflicts creating an undercurrentof larger social unrest. As urban growth is an integral part of the anticipated globalprogression six out of 10 people will reside in urban areas by 2030. By that time theWorld Bank estimates our world will need 300 million new housing units.
Governments policymakers and businesses like ours should not look at this merely as aneconomic opportunity but also as a social value-addition that will create a more equitablesociety. Indeed lop-sided development lets the gap between the wealthy and the poorincrease which will only foster societal conflicts and impede growth momentums.
Research has shown that (affordable) homeownership yields four distinct measurablesocial benefits viz. better health for homeowners and their children reduced crimerates investment in education due to disciplined savings and increased community-basedcivic engagement. This is reason enough for us to ensure that homeownership becomes apriority for the civil society. This is also the core thought behind the theme for thisfiscal's Annual Report Giving India A Home' driving the need to create abetter India by expanding financial inclusion.
Globally 93 percent of home-seeking adults do not have access to formal housingfinance options. For DHFL this has been at the core of our foundation and businessstrategy as facilitating homeownership to marginalised sections through affordablefinance helps create a society that is more equal fair and civil.
Housing for All by 2022
India accounts for 20 percent of the global house construction target. We are set towitness the largest urban transformation of the 21st century under the guidanceof our honourable Prime Minister Shri Narendra Modi's Pradhan Mantri Awas Yojana (PMAY).The scheme aims to build about 60 million housing units to provide homes to all Indians by2022.
Urbanisation opens up job opportunities and helps reduce inequality. Urbanisationcannot be overlooked in the quest for development although it is imperative that westrike the right balance between agrarian reforms rural enterprises and urban growth toachieve a sustainable transition to urban-led growth. By 2030 40.76 percent of India'spopulation is likely to live in cities and by 2050 the country will lead the globalurbanisation surge along with China Indonesia Nigeria and the United States. Since halfa billion of these new consumers will need to have a roof over their heads it has becomecritical to re-engineer socioeconomic fabric with special emphasis on safeguardingrelegated communities and promoting semi-urban regions.
Globally 93 percent of would-be homeowners do not have access to formal housingfinance options. In India the situation has improved significantly since the introductionof PMAY in 2015. At DHFL we have always aimed at implementing transparent effective andhumane credit appraisal measures which ensure that the marginalised sections with nopresence in the formal banking system have access to finance for owning a home.
Measures like the dedicated Affordable Housing Fund (AHF) in National Housing Bank thatwill be funded from the priority sector lending shortfall and fully-serviced bondsauthorised by the Centre are encouraging. Further in March 2018 the Union Cabinetapproved the creation of the National Urban Housing Fund (NUHF) of Rs. 60000 crore tofast-track the implementation of PMAY (Urban).
These initiatives point towards the Government's earnestness to ensure the success ofthe Housing for All by 2022' mission. Your Company's market leadership will ensurethat we stand to gain from the wide spectrum of opportunities supported by theGovernment's proactive policies that will optimise our cost of funds.
HFCs - Financing India's Housing Infrastructure
Recent events in the Indian banking and financial sector have seen a strong push by theGovernment judiciary and regulators to clean up the system. Armed with the IBC Act(2016) banks and lenders in our country are going through a testing time. After banksfaced setbacks for lending to the realty and allied businesses finance for these sectorshave dried up. While return of banks as the key player in the credit delivery system isessential non-banking finance companies (NBFCs) and Housing Finance Companies(HFCs) have taken the lead to ensure that finance is available both on the supply anddemand side for infrastructure projects like affordable housing. I firmly believe that therecent measures will result in a robust and healthy credit culture.
Though this short-term pain was inevitable these events have proved that NBFCs arevital for the Indian formal lending setup. The combination of the inherited structuralstrength of Indian
NBFCs along with the entrepreneurial approach to business has evolved them intotrusted yet accountable lending entities. It is estimated that the contribution of NBFCsin the total retail lending will increase to 17.1 percent in FY 2018-19 as compared to13.1 percent in FY 2014-15 and 9.4 percent in FY 2005-06.
With DHFL being a prominent HFC in the country focussed on affordable housing financeit is a matter of pride and satisfaction that we are contributing to building India'sinfrastructure dream. Our Founder Late Shri Rajesh Kumar Wadhawan instituted DHFL on thepremise that homeownership gave people deep roots strong wings and the freedom to pursuetheir dreams. His vision today has assumed a priority focus of national scale and hasevolved into a paradigm for social and economic development. Through our business conductDHFL is helping to build more depth into the financial system by creating more mortgageservice businesses and generating more liquidity in the capital market thus in a waypromoting a more secured social environment.
Building a Leadership Brand with Trust Transparency and Technology
In today's world of real-time reportage social media amplification and low consumertrust in brands for the safekeeping of their confidential data we want to conductourselves in a manner that builds stakeholders' trust. Let me assure you that we arebuilding an organisation of committed leaders across the hierarchy. Integrity ethics andempathy are embedded in every member of our professional team which is passionateyet purposeful in its conduct.
We want our organisational platform to become an enabler that nurtures and grows futureleaders from within the ranks.
We are embarking on a larger mission of making DHFL a partner in every household need -Financial and beyond.
We want to attract the best talent to our Company where entrepreneurial freedom and aprofessional work environment are provided in equal measure.
Today customer-centricity has a new meaning. Recent examples of data breach of userinformation have created global political crisis making businesses vulnerable tounintentional misuse. We want to leverage technology as a key enabler to serve customersin a more efficient quick and non-intrusive manner. We want to use the insights garneredfrom behavioural economics and big data to build long-term customer relationships.
Similarly we want to use technology to build a backend system that ensures a highlevel of credit evaluation and monitoring risk practices and safety of our consumers'data. The establishment of Central Processing Units at Mumbai and Hyderabad were keyevents in this direction. In my previous letter I had spoken about a phygital'approach - the best of Physical and Technology mix in reaching and serving customers. Wehave made considerable progress in this direction and are now equipped to serve themthrough an omni-channel strategy of online and branch networks.
The biggest opportunity and risk to our business today is technology-led disruption.With the millennials joining the workforce we must build an organisation that is agile.According to a report by Boston Consulting Group more than half of all new Internet userswill be in rural communities and they will constitute about half of all Indian Internetusers by 2020. Where traditional organisations will have to retreat we will need to moveforward with digital financial inclusion to cater to digitally native consumers who haveleapfrogged to the forefront of digital finance.
We are continuously looking at fintech innovations that will help us serve customerswith speed surety safety and security. We want to become an organisation where thecustomer is at the centre of our growth trajectory surrounded by prudent businesspractices humane ethos and sustainable action towards the environment and society. Andwith over 9500-plus employees we aim to be a preferred employer brand.
DHFL's investment in Fintech brand Early Salary' a technology platform forlending to salaried class to draw down against future salary is a significant step inbuilding synergy with the new world of technology-based lending.
Sustainable and Prudent Performance
Currently we have more than 590000 (this figure excludes FD customers) customers andmore than Rs. 1 trillion AUM. This achievement reinforces our position among the top twohousing finance companies in India. We will continue to focus on bringing down our cost offunds in the coming years.
During the year your Company retained CARE's highest AAA (Triple-A) credit rating. Wedelivered a robust performance yet again registering 18.15 percent revenue growth of Rs.10464.45 crore for the year ending March 31 2018. Profit before tax and exceptionalitems stood at Rs. 1756.62 crore an increase of 25.26 percent on a Y-o-Y basis. Our loanportfolio witnessed growth at 27.51 percent to Rs. 91932.32 crore as on March 31 2018.
In our endeavour towards furthering our Founder's vision and facilitating theGovernment's national mission we were acknowledged by My Liveable City' andknowledge partner National Housing Bank' as the Best Performing PrimaryLending Institution' under Credit-Linked Subsidy Scheme (CLSS) for Middle Income Groups(MIG) for highest number of credit subsidies under PMAY. This accomplishment is truly atribute to our Founder's noble vision.
Over the past three decades we have nurtured the DHFL brand with diligence. TodayDHFL enjoys significant trust and recognition among our customers and peers. Our Insurance(Life and General) Mutual Fund and Education Finance are rapidly scaling up and we areopen to synergistic business evaluations in the micro-finance and other similar sectors.
As conveyed in my opening remarks we are embarking on a larger mission of making DHFLa partner in every household need financial and beyond in line with our mission toGiving India a Home' with many reasons to smile and celebrate.
WGC Taking our Learnings to the World Learning from the World
WGC (Wadhawan Global Capital Ltd.) our Promoter Group entity continues to build onthe Group's synergies and looks at the global arena for new disruptive businessopportunities in the fintech sector. The aim of the parent platform is two-fold first being able to consolidate learnings customer insights process efficiencies andpeople leadership across various group companies. It will also act as a knowledge-ledstrategy think-tank to share best practices and build group competencies.
Today the Group's leading businesses and new-age investments ensure a contemporarygrowth strategy and approach. With a group AUM of USD 22 billion we have recently forayedinto the wealth management space.
Empowering Communities through Compassionate Conduct
DHFL's business model has empathy ingrained in its conduct to empower the marginalisedto become part of the mainstream through respect and achievement of homeownership. Our CSRefforts continue to be aligned with the same principle of making a real on-ground impact.To widen the canvas further enlist partnerships and build sustainable models throughresearch and innovation we constituted a Section 8 Company DHFL ChangingLives Foundation with a key focus on ECCE (Early Childhood Care and Education).Alongside we will continue our CSR work in the areas of skill development financialliteracy rural development and sports.
While education is a key CSR focus area for Indian corporates not many programmes arededicated to the implementation of the National ECCE policy despite the segment beingrecognised as a high-priority area by the Government. Through DHFL Changing LivesFoundation we aim to bridge this gap with a focus on the core areas of educationnutrition child-friendly anganwadi infrastructure and stakeholder empowerment. We havepartnered with various governmental agencies and private entities in pursuit of theseobjectives.
During the last fiscal our skill development centres across 23 Tier II and IIIlocations provided training to 6000+ youth in 12+ job roles. As part of our villagetransformation mission we have introduced a tobacco control programme to make thesevillages tobacco free. Our financial literacy programmes have reached out to 40000+households to aid transition from informal to formal housing create livelihood linkagesand linkages with Government welfare schemes. Additionally the programme promotes theGovernment's PMAY scheme.
Building an Equitable Society
With gap between the segments amongst the population widening any development thatbridges this gap is considered a step towards a sustainable future. As an organisation wewill continue to conduct ourselves with prudence while we strive towards benefiting ourcustomers maximising stakeholder wealth and thus building a world that is equal fairand democratic for every citizen. It is indeed a proud moment for all of us to beassociated with an organisation that helps bridge this gap and contributes towardsbuilding a more equitable world.
In our mission which we call Giving India a Home' our endeavour is to widen thecompass of our homeownership initiatives to drive financial inclusion in a manner that isdesigned to carve a more equitable society.
I would like to thank all our stakeholders including employees customers regulatorsfinancial institutions vendors etc. for making this journey memorable andworthwhile. I am confident that with your continued support and cooperation we shallsucceed in leading our mission to a successful conclusion committed in line with theGovernment's mission of Housing for All by 2022'.
With Best Wishes
Chairman & Managing Director