Piramal concall
More than 150 employees , senior management across verticals of sales , operations .
First branch in Goregaon and second in next week in thane .
15 developers in Mumbai region .
30 projects
5000 connectors
50 DSA - direct selling agents
200 crores AUM.
Thesis for HFC
We provide all product to developers , so only HFC was left to be added this basket .
It’s not a crowded industry because only 8-10 people have AUM of 10k crores .
Our model is B to B to C where developer plays a important role to connect to retail .
We provided relationship plus innovation to developers which gave us this AUM .
Tailored products -
SURF - Typically Indians buy flat of around 80% of net worth and not of what they will earn in future . And they land up taking sub optimal flat according to their need and want to change it in 5-6 years .
Thus they pre pay loan in 5-6 years of a 15-20 year loan .
So stickiness was missing , we solved it by encouraging customer to buy a bigger house after checking all risks and creditworthiness of customer and pay same EMI as they would have paid , if bought the smaller house they thought off and after 5 years we will step it up the EMI.
And now this product has been a hit , demand pull is coming for it all over the country .
"199 " - The super rich in india , if we go by their income you will not give them loan for buying in suburbs as their income is not strong , but aa we have real estate background and worked with various private equity , we can’t understand their wealth and capacity , so it helps to process loan under this product .
ROE for this business may not be strong as wholesale , but due to this tailored product , you will see good yield in this quarter result only .
We are known for our checks and balances and early warning signal .
Role of technology - The benefit of being a late entrant is technology which we would not be able to embraced if we would had a earlier player in HFC .
We developed technology that how we can onboard any channel partner in 45 seconds through RERA number that we get from them .
Also customer can check their loan file with company online easily and also all instalments and expenses .
We will also give loans to self employed sector , which is under served in housing finance especially in Tier 1 and Tier 2 .
We are making checks and balances which will allow us to give loan in 11 days .
Also Shriram housing finance who give loans to more under served than self employed who doesn’t have fix income , so we built our model on base of their philosophy .
Also ROE will be higher in this segment .
Another thing that will be played in coming quarter is the biggest platform of wholesale finance with 10,000 distributors .
Also apart from this , we will have ear to ground that how sales of our developers are going and they will also become our DSA .
Generally , other DSA keep on switching loans of their clients because they make profit that way but because our DSA would be home grown , there will be stickiness for us .
Brickex would also help us greatly in deciding price points and other parts of ecosystem .
Being a newcomer , we are keeping costs low from first day . We are operating through hub and spoke model , in MMR region we opened in Goregaon and one in thane for Easter region .
And thus we are done with , no more branches in Mumbai . We need some branches because it requires for credit assessment and if someone want to visit .
We have onboarded Satish Mehta , who had been at 2nd number in HDFC and every policy and nitigrity had gone through his eye in Piramal HFC .
Affordable housing and LAP are other things which we will provide .
Affordable housing is a production thing , now a days standardised flats are constructed so there is cost cutting and a very thin margin which is due to value engineering and profit is due to turnover .
It is coupled with Awaas Yojana .
We are making a product for affordable housing in coming month .
Other two will be LAP and small construction finance .
We will give LAP on base of income and not property based .
Cash flows will be seen at time of giving a loan .
Construction finance will start from six months in tier 2 cities of A grade developers .
Till now it doesn’t made sense for wholesale platform to go there and make 10-15 crores loan but now we will have a branch there which will take care of it .
Q&A
Yield on 200 crores AUM
⁃ This is across 30 projects , 9.5% yield mostly salaried , because of tailored product and this is expected to increase . As insurance will also add up .
⁃ Developer is not paid till now for recommending us , this also decreased cost for us . And also we will give solution to various developers so they will not charge anything aa no DSA is involved .But we are also building a programme for fees for recommending us .
⁃ How to leverage brickex network - they bring stickiness to table , they will charge less but most imp things is stickiness . It will not be easy to take out that customers for other DSA .
⁃ Loan mix - small construction - 20% LAP - 15-20% of rest and other is housing finance .
⁃ Front end team will be different for retail but back end will be same .
We will go for top 10 cities and then simultaneously for tier 2 and tier 3 cities . It’s will be a mix and match . First priority is to stabilise our system , everybody can give loan but it’s return and recovery that differentiates .
Technology will be replicated but we will keep on innovating and tweaking existing models , also replication of strategy can be done but not execution .
Our wholesale and retail team works together which is not seen in other organisation .
Also everyone doesn’t have such understanding of real estate .
Today Piramal is partner of choice , post RERA and post demonetisation , as no guy gives such a variety and comprehensive range to developers .
Difficulties in affordable housing
⁃ First it will be tested in MMR region , some difficulties are easing out which makes us confident of opportunity . They are :-
⁃ Land prices have corrected to some extent as it is outside city limits , but not by 30-40% because of Slow sales
⁃ Also Consolidation of land due to distressed developers holding majority of land and they want to desperately sell even at discount unlike earlier where landowners with surplus land were holding .
⁃ Approvals are coming in faster in some states .
⁃ Cost of construction comes down due to standardised flats .
ROE threshold are there but can’t be said .
For overall financial services business , we will keep it above 20% on long term basis .
In short term , there will be cost pressures but we will broadly try to focus on self employed , tier 2 and 3 cities and we have a separate team for cost control .
How Shriram housing will help us ??
By method of proprietary underwriting , it is complimentary to us and not competitive , we will also go in joint venture in some of affordable loans where required for under served society informal people .
We will not be using their branches for cross selling
