interview | SACHIN PILLAI Business

Awaiting right time for IPO, says Hinduja Leyland Finance CEO

‘Post DHFL issue, investor confidence has fallen’

Hinduja Leyland Finance Ltd., a non-banking finance company of the Hinduja Group, which had deferred its Initial Public Offering, is adopting a wait-and-watch policy for investors’ confidence to return, its chief executive officer Sachin Pillai said in an interview. Edited excerpts

You planned to raise funds via IPO twice, but it was deferred. Why?

We had filed the document in June 2018 and got approval in September. We started roadshows in India and the Asian market. Then, the DHFL issue came out. Post that, there has been a lack of confidence as far as the Indian BFSI, NBFC, HFI segments were concerned. That caused us not to go ahead with road shows and to wait and watch. After that, on a regular basis for two to three months, more names got added. Investor confidence has not yet come back.

How are you managing funds under these circumstances?

In January, ₹200 crore came from existing shareholders. Over the last 16 to 18 months, the promoters and shareholders have put in ₹900 crore. While the intent of the group is to list the company, the capital was always made available. Growth was never compromised for want of capital. We are always well-capitalised. We will again look at the appropriate window to go ahead with listing the company.

Do you have a timeframe in mind?

It depends on the market; how the confidence comes back for the housing finance and NBFC businesses. Till then, growth will remain unaffected. We will wait and watch for investors’ confidence to return for NBFCs. The current capital is sufficient for the next one year.

How were the first two quarters in the backdrop of the economic slowdown?

We are largely into financing medium and heavy commercial vehicles. It constitutes 40% of our book. We have three non-vehicle financing capital businesses — loan against property, wholesale financing of smaller NBFCs and affordable housing finance.

Given the varied diversified asset classes that we have presence in, certain asset classes [were] going through a sluggish period in terms of growth.

In this year’s H1 compared to last year, we have grown our book 23%. So, on an overall basis, disbursement growth has been there. We have been able to counter the slowdown, given the fact that we are well-diversified on asset class and have to maintain the growth momentum.

We have a gross NPA of 4.3% and net NPA of 2.8%. Compared to other players, it is very much in line.

How will the remaining two quarters pan out?

Historically, 40% of business has happened in H1 and the rest in H2 due to festivals, monsoon and kharif crop. We always see Q3 [as a] stable quarter and Q4 sees growth.

Even in 2013-14 when there was substantial de-growth in the vehicle sales segment, the same pattern played out. We expect Q3/Q4 much better than Q1/Q2. Last year, from November to March, we had de-growth. Going forward, in these five months, we will see lesser degrowth, or marginal growth. That’s our expectation.

Will the transition from BS-IV to BS-VI affect your business?

We don’t anticipate slowdown per se to come in. However, there might be a brief period of wait-and-watch as far as customers are concerned, because it is a technology change happening.

What are your growth and expansion plans?

We are looking at 20% growth in this fiscal; this is broadly in line with the expectation at the start of the year. We are present in 1,550 locations. Our distribution is largely in the trucking cluster. So, we are in semi-urban and urban areas and have 3% reach in rural areas. Rural could well be a growth engine for us in future.

How is your affordable housing subsidiary doing?

We have a book size of ₹1,600 crore. We have presence in 480 locations. Our average ticket size is around ₹17 lakh. We will be focussing in the same space — on ₹17 lakh to ₹20 lakh loan size. We should be able to establish a growth of 25-30%.

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Printable version | Feb 21, 2020 3:55:33 PM |

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