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LIC Housing Finance Ltd.

BSE: 500253 Sector: Financials
BSE 00:00 | 03 Feb 399.80 5.00






NSE 00:00 | 03 Feb 399.70 4.85






OPEN 390.30
VOLUME 35514
52-Week high 443.50
52-Week low 291.75
P/E 7.06
Mkt Cap.(Rs cr) 21,991
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 390.30
CLOSE 394.80
VOLUME 35514
52-Week high 443.50
52-Week low 291.75
P/E 7.06
Mkt Cap.(Rs cr) 21,991
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

LIC Housing Finance Ltd. (LICHSGFIN) - Chairman Speech

Company chairman speech

We successfully triggered our business continuity plans and enabled work from home formore than 90% of our employees. We are proud to share with you that a change of this scalewas executed smoothly. .

Dear Shareholders

As I write this we continue to be in the middle of the COVID-19 pandemic - the biggestcrisis we have seen in our lifetime. The pandemic and the resultant lockdowns led tounprecedented socio-economic disruption and loss of human life. And just when the exitpath in the form of a vaccine became visible the second wave hit India which resulted inanother bumpy ride for the Indian economy.

Having said that I reiterate that we at LIC Housing Finance Limited have undergoneadverse economic circumstances earlier too. And each time we have bounced back with evengreater strength and vigour. Hence like the earlier crises we are confident we willbounce back from the Covid crisis as a stronger and more valuable LICHFL having masteredthe new normal with the unleashing of a fresh wave of energy.

Impact on the industry

One of the sectors most affected by the outbreak and the ensuing lockdown was realestate and housing finance which was already facing a liquidity crunch following theIL&FS crisis. In March 2020 the Reserve Bank of India (RBI) announced a moratorium onloan repayment of term loans till 31st May 2020 but this was later extendedby another three months. The loan moratorium had a significant impact on housing financecompanies with a substantial portion of the aggregate underlying assets placed under it.

In addition to this the Government also extended a credit line and liquidity supportin the form of Emergency Line Credit Guarantee Scheme (ECLGS) to MSME borrowers in theform of collateral-free loans to mitigate the economic impact of the pandemic. In order tofurther support COVID-19-hit customers the Finance Ministry announced an extension of thescheme from time to time through the introduction of ECLGS 2.0 ECLGS 3.0 and ECLGS 4.0.

However the housing finance market witnessed good bounce back in terms of confidenceon the ground from the 2nd and 3rd quarter of the year. The gap keptnarrowing to move towards pre-COVID-19 disbursement especially with the vaccination drivein place at the start of Current Year 2021. Demand for housing was back in lower incomeand middle-income segments. Affordable housing finance witnessed a faster bounce backamong retail asset classes. On account of this business being semi-urban and rural-basedit was relatively unaffected as compared to urban cities.

Rising above the pandemic challenges

During these challenging times the one thing that remained of paramount importance forus was safety and well-being of our employees and our customers. At the early onset of thecrisis we successfully triggered our business continuity plans and enabled work from homefor more than 90% of our employees. We are proud to share with you that a change of thisscale was executed smoothly. We actively leveraged technologies to remain connected andengaged ensuring employee welfare and seamless customer service delivery.

As we settled into the new way of working our focus continued to be to provideimpeccable service to our customers. During the pandemic we provided seamless delivery ofproducts and services protecting the safety of our customers. Our local teams engagedwith borrowers

At LICHFL we are India's second-largest pureplay mortgage lender finance company interms of assets.

Being a long-term player with a strong record of 35 years and wide industry experiencewe have witnessed and experienced several credit and economic cycles and moved fromstrength to strength.


affected by the virus to provide guidance to them on their borrowings. We alsoconstantly interacted and engaged with customer segments to address their anxietyregarding the loan moratorium offered by the Government. Further we also extended oursupport through counselling sessions on how to best avail the moratorium.

Ability to withstand challenges

At LICHFL we are India's second-largest pureplay mortgage lender finance company interms of assets. Being a long-term player with a strong record of 35 years and wideindustry experience we have witnessed and experienced several credit and economic cyclesand moved from strength to strength. We are not only aware of the current challenges butalso have the agility and dexterity to negotiate and overcome these economic and industrysituations with even greater strength and vigour.

Following the Government's policies about 25% of our loan book was placed undermoratorium. The proportion of retail loans under moratorium was lower at 16%. Ourrestructured assets are also expected to rise largely because of the impact of thepandemic's second wave. During the first lockdown the Reserve Bank of India (RBI) made anexception by launching

a loan recast or restructuring facility for those impacted by the pandemic.

In the 4th quarter LICHFL recorded 197% YoY growth - the highest YoY growthin the past three decades and business is on a high growth trajectory. Our collectionscontinued to hold up above 90% even during April and May 2021 despite COVID-inducedlockdowns. A collection efficiency of 96% of pre-pandemic level was reported for loan bookout of moratorium. Our borrowers were able to ride the lockdown without trouble andcontinued to keep up their repayment after the economy unlocked.

Disrupting the market

In probably the lowest in the market we announced a 6.9% rate of interest on new homeloans in July 2021 resulting in low EMI payment. Attractive price points and affordableEMIs helped us in addressing the demand side for buying homes. We also utilised thelockdown period to further drive operatini efficiencies. All this along with softening ofcost of funds and our acute focus on low-income housing finance segment cushioned theeffect of COVID-19. Further we are also comfortable on the liquidity front.

Adequately capitalised

During the year we infused three tranches of Tier 2 capital through a capital infusionof ? 1800 crore. This Tier 2 capital infusion has been done after almost a decade. We arefurther exploring the means to improve Tier 1 capital from regulatory perspective and alsogrowth capital through the promoter including through a preferential allotment.

With this our capitalisation profile will remain adequate from a regulatory andsolvency perspective. We will be well-positioned in terms of capital adequacy norms andwill lead to healthy expansion of business furthering loan book size. Currently ourcapital adequacy stands at 15.28% above regulatory levels and needs to be shored up to15% by end of FY2022.

Drivers for future growth

In the backdrop of the COVID-19 pandemic demand for house moved up as asset creationassumed priority and people became keen to buy their own home as security. With thecorporate sector moving to a hybrid model of working and with online studies in schoolsand colleges people are either buying bigger houses or modifying and renovating theexisting houses. Several people moving back to their native

Interest rates too are at an all-time low - in the range of 6.9% encouraging homebuyers to go for purchase.

In addition the Government provides adequate tax benefit to home buyers.


towns during the lockdown to continue working from there also increased demand in Tier2/3 cities.

Being in a buyers' market

Based on our experience of 35 years we feel this is perhaps the best and favourabletime to buy a house. There is price stability across real estate markets and segments.Real estate prices have fallen by up to 10% in the bigger cities.

Interest rates too are at an all-time low - in the range of 6.9% encouraging homebuyers to go for purchase. In addition the Government provides adequate tax benefit tohome buyers. And a marginal fall in home prices across major markets has been an enablingfactor. Another big driver for push in demand has been the stamp duty waiver given byseveral state governments including Maharashtra and Karnataka. At LICHFL too charges onprocessing fee were eliminated for loans up to ? 50 lakh while a 50% processing fee isbeing charged on loans over? 50 lakh.

Those with stable earnings haven't been impacted by the pandemic so much and in factthey are looking to cash-in on the opportunity. At LIC Flousing we too have seen arebound in the mid-segment owing to a growing demand for large spaces. We have beenexperiencing potential buyers taking the plunge on the back of property prices bottomingout.

PMAY fuelling demand

The recovery in housing finance sector was faster also due to the inherent demand andsops given by the Government under the Pradhan Mantri Awas Yojana (PMAY) which envisagesaffordable housing for all by giving borrowers

financial means to purchase a home via a subsidy on home oan interest rates.

The CLSS (Credit Linked Subsidy Scheme) a component of PMAY under which not onlyeconomically weaker but middle-income groups can also avail of home loans at reduce EMIsis expected to be a major driver of MIG home loans currently. It provides the requiredconfidence to prospective first-time buyers to go ahead with their purchases and augurwell for the sector. LICHFL earns 35-40% of its loan bookfron this segment and this isexpected to be a significant growth driver going forward. Total loan disbursed under PMAYCLSS was 115443.19 crore making us the one of the largest ender under the scheme.

Setting the agenda for our future

During these challenging circumstances our focus remains to improve our market shareand advance on tech-enabled customer service. We continued to follow our 4-R Strategy tcseize the new opportunities emerging in the past year and to further strengthen customerrelationships. Our investments in Project RED (Reimagining Excellence through Digitaltransformation) are aimed to generate our long-term objective of creating more stakeholdervalue expanding geographies and delivering elevated and best-in-class customer service.Moving forward we are working towards consolidating our position in all the areasproviding better customer service delivering value to all our stakeholders and improvingmarket share.

Driving growth

We see bright prospects to record double-digit growth this fiscal supported by thereturn of home loan growth to pre COVID-19 levels government push revival in affordablehousing segment and new products and support measures. As sentiments are improvingday-by-day we expect a rub off in the realty space. A big chunk of an upwardly mobilemiddle-class segment urbanisation rates and the emerging concept of Work from Home (WFH)will sustain demand.

We seek to continue our focus on the core strength area of retail home loans toindividuals.

What lies ahead - Outlook for FY2022

FY2022 is still a COVID year - and we are not out of market uncertainties just yet. Thesecond round of lockdown in April-May 2021 affected market sentiments even as thevaccination campaign of the Government induced the much-required confidence. HoweverFY2022 will also be

Even though this year has had many challenges we are operationally ready to face themand seize the emerging opportunities.


a year of consolidation and a year of customers with our improved digital footprint. Itwill be a year wherein Project RED will see the maximum projects.

With all the above we hope to emerge as a much stronger LICHFL with even greaterstrength vitality and robustness and with a great sense of confidence and capabilities.

With the optimal use of technology we continue to live our dream of building a rooffor every Indian by supporting affordable housing. With the Indian economy expected torecord near double-digit growth we too foresee healthy growth in disbursements andprofitability. We remain positive on the intrinsic demand for housing. Despite the secondwave we expect a bounce back but with even higher intensity. Demand is visible acrosssectors and loan segments. Small towns and affordable loans have already taken a lead.People relocating to native towns aided growth momentum in Tier 2/3 cities while theconcept of WFH continues to sustain demand.

Finally I take this opportunity to thank our management team and express my gratitudeto all our employees without whose relentless support we could not have steered thisjourney to new milestones.

also thank our Board of Directors for their continued support and guidance and forhaving inspired us to perform better in these difficult circumstances.

Thanking you

Yours sincerely

M.R. Kumar


Message from the Managing Director & CEO

Dear Shareholders

FY2021 can be described as a unique year. The sudden outbreak of the COVID-19 pandemicaltered broader outlook witnessed global economies facing slowdown fears and India's GDPgrowth slowing down with challenges emanating from a strict lockdown regime.

Although the first wave of COVID-19 was contained and economic activities resumedaround the third quarter of FY2021 the resurgence of the virus in the second wave was farmore devastating. Lockdowns were again imposed across the country. The outlook stillcontinues to be uncertain in terms of its impact on economic recovery.

The housing finance sector too initially grappled with liquidity and demand but in thesecond half of the fiscal year consumption demand gradually increased across segments.While initially growth was restricted to the affordable housing finance sector onlylater the mid upper and premium segments also grew. At LICHFL we had a satisfying yearwith a rising loan book even as we maintained our profitability asset quality andsolvency and took collaborated efforts to overcome the difficult circumstances.

The Government and the Reserve Bank of India (RBI) took steps and granted a moratoriumtwice which ended in August 2020. At LICHFL we too offered moratorium to our customers tosoften the COVID-19 blow. And I'd like to share that most of the borrowers paid back theirEM Is. After the moratorium we have witnessed more than 96% of the collection happening.

How we performed

During FY2021 Income stood at 7 19848 crore as compared to 7 19670 crore in theprevious year while Profit After Tax rose 13.8% at 7 2734 crore against 7 2401 croreearlier.

Our Outstanding Loan Portfolio was up 10% at 7 232003 crore in comparison with 7210578 crore. Individual Loan Portfolio also increased 10% to 7 216047 crore. Adividend of 425% was recommended for FY2021 by the Board.

Despite a challenging environment there was a healthy growth in disbursementespecially in the individual home loan segment. Total disbursement was 7 55223 crorevis-S-vis 7 46936 crore a year ago. Individual home loan disbursement was up 125% from 737539 crore to 7 46926.99 crore.

Strong business traction with good disbursement led to growth in our assets undermanagement and the outstanding portfolio. With retail disbursements rising net interestincome remained stagnant. Our Net Interest Margin was 2.37% vis-S-vis 2.38% in theprevious year.

Operational performance

FY2021 has probably been one of our best years in terms of operations in the pastdecade. We witnessed good customer retention with a reduction in cost of funds.Improvement in products in the past year led to a sustained market share.

In terms of disbursement we had the best 3rd and 4th quarters inthe fiscal year which can be well attributed to our market outreach product innovationand distribution network.

Making adequate provisioning

Gross NPA rose to 4.12% in March 2021 vis-S-vis 2.86% in March 2020. The NPA levels arebeing monitored stringently and continue to be a matter of high priority. The good news isthat we also made recoveries in some big accounts during the year. We set aside aprovision of 7 984.8 crore. Provisions were high due to NPA recognition from themoratorium book. Beefing up the provisioning has been comforting for asset quality as wecontinue to build protection against the anticipated stress.

Improving asset quality

The COVID-induced slowdown impacted performance of housing finance companies with lowerhousing credit growth and rise in GNPAs. With loss of livelihood and reduction in incomesespecially for self-employed borrowers engaged in non-essential services COVID is likelyto impact the asset quality of retail home loans At LICHFL we remained strongly committedto preserve our asset quality and have been closely monitoring it and also preparing forhigher provisioning. An NPA Warrior and Core Team has been constituted at the local levelwith stringent monitoring at the corporate office.

Digital - the way forward

As companies are becoming more and more agile and nimble-footed one trend that we seeaccelerating is the precipitation of shift to digital and rapid adoption of technology.Even though this was happening earlier too the crisis has offered an opportunity tohasten the transformation. We too evaluated our technology stack to operate withflexibility and agility and gain the capability to respond and adjust quickly to changingcircumstances.

Digital has become the way forward. With the establishment of Project RED (ReimaginingExcellence through Digital transformation) we expect a profound impact on the establishedway of our operations. As we made differentiated investments to strengthen our offeringsaccelerated our digital capabilities and adopted tech-led processes our strategy ofdriving a ‘digital first' approach became particularly relevant in the currentcontext.

We invested in Project RED with long-term objectives that will generate morestakeholder value expand our geographies thereby contributing to the economic growth ofthe country. We have made massive strides in accelerating our customers' journey throughour differentiated offerings. Our ultimate objective behind this is to organize andautomate every facet of customer interaction and deliver elevated customer experience.

Our technology investments will increase further - as we keep gaining capabilities toface the crisis and reduce future disruptions.

Innovating and advancing

During the year we introduced a special home loan product Griha Varishtha forpensioners catering to individuals covered under defined pension benefits.

The tenure is till the attainment of 80 years of age or maximum of 30 years whicheveris earlier under the Defined Benefit Pension Scheme. Close to ? 1000 crore has alreadybeen sanctioned under the scheme since its introduction in July 2020. Apart from this ourinnovative

product offerings are gaining traction. Such as the 2020 Home Loan Offer that gives 6EMI waivers for borrowers opting for ready-to-move-in homes and 48 months principalrepayment moratorium for under-construction projects put fullstop at constructionprojects.

Towards a sustainable future

We have brought about changes in our liability mix and also reduced the overallweighted average cost of funds. We are also looking at re-skilling distribution to supportremote onboarding. To further improve the quality of our existing assets especially inthe backdrop of the moratorium we shaped up a special task force - the NPA Warrior Team -for efficient asset recovery and to imbibe a sense of accountability. In addition toadopting tech-led processes we are collaborating our insights with that of our customersto further strengthen our asset quality.

Years of persistence

Even though this year has had many challenges we are operationally ready to meet themand seize the emerging opportunities. We are confident of FY2022 being a year of growth.We will also continue to surpass your expectations yet again paving our way for apromising future.

Our inherent strengths coupled with our products and services growing affluence andchanging consumer preference towards trusted partners and digital manner of engagementpresent an exciting opportunity for us.

In the end I take this opportunity to thank our shareholders and my colleagues on theBoard who have been valuable guide in steering LIC HFL to new heights. We also thank ourcustomers who have patronised Brand LICHFL to make it the fastest-growing HFC in India. Wealso thank our regulator the National Housing Bank for their continuous and timelyguidance.

Lastly I am also thankful to our shareholders who reposed their trust and confidencein the Company. We are committed to work through the current environment and our futurefeels bright and exciting.

Your trust and confidence in us helped us build a very strong organisation whosefuture has always been more promising.

Together we shall overcome and triumph!

Yours very sincerely
Y Viswanatha Gowd
Managing Director & CEO