My personal view is, we need to read between the lines on what the CMD said in his interview.
Management highlighted 3 strategic decisions in the earnings conference call, which are as follows:
- Strategic decision to convert DHFL to a completely retail focussed entity. This means - developer loans - which constitute 17% of the lending portfolio (amounting to around 22K) as of Sep. 2018, is to be brought down to below 10K (lowered by more than 50%) by March 2019 and subsequently bring down to 5% or so by Q1, Q2 FY20. Different strategies are being considered to sell down the portfolio. This includes finding portfolio investors, particularly for projects that are 60% or more complete. Alternatively, DHFL is also considering joint development route or an AIF structure. DHFL has 2 types of projects - SRA and non-SRA in portfolio. From management commentary it appears there is interest in these assets, particularly the SRA projects, and management appeared confident of achieving the targets, although some hair-cuts are possible.
- The second strategy is to make growth more profitable RoE accretive and less capital intensive. This essentially means greater securitisation of retail loan pools, both home loans & LAPs to banks. This will reduce capital requirement and improve RoE
- The third strategy is divestment of non-core assets. This process has already been initiated and an investment banker has been identified for the purpose.
Needless to say, ALL the strategies mentioned above are directed at raising liquidity. You can call it a new business model or something else, but the objective is this. The next few quarters are expected to tough for the industry, DHFL included, till normalcy returns to the debt market. In the near term, fresh disbursements are expected to be negligible (as pointed out by other VP members), spreads are expected to compress and hair-cuts are likely on the monetisation of developer portfolios. However, company has 34 years of experience in going through multiple stress cycles. Management has experience and strategies in place to handle the near term liquidity crunch.
Disc. invested & views are personal (& not an expert on BFSI)