DHFL, one of India’s most prominent housing finance companies, has cracked the process of giving home loans to the low and middle income group segment. Harshil Mehta, the company’s CEO, takes us through his strategic growth plans for the business.

Harshil Mehta’s mandate when he took over as the CEO of DHFL in 2015 was to maintain the growth momentum in the organisation and ensure that growth comes with quality, which is evident from the company’s performance for the first nine months ended December 2015. With net non-performing assets of 0.84 per cent, DHFL’s assets under management increased to Rs. 660 billion from Rs. 526 billion in the corresponding previous nine months while simultaneously witnessing strong growth in disbursements to Rs. 163.80 billion from Rs. 135.30 billion.

With a presence of over three decades in the housing finance industry, DHFL has come a long way in its journey of transforming the lives of Indian households by enabling access to home ownership. Through its years of experience, the company has earned deep insight to serve the affordable home loan segment and retain its focus on the low and middle income (LMI) group in India, one of the largest and fastest-growing segments of the country.  Based on the needs faced by its target group, the organisation has gradually expanded into related product categories and currently offers housing loans, loans to small and medium enterprises, mortgage loans and on the liability product side, a range of fixed deposit products. It offers life insurance products through DHFL Pramerica Life Insurance Company Ltd.,

a joint venture with Prudential Financial Inc. of U.S. while education loans is yet another offering through an associate company, Avanse Financial Services Ltd.

It currently has a large distribution network of 362 company-operated locations across India and 357 locations through alliances. Almost 80 per cent of its distribution footprint is spread across Tier 2 and Tier 3 cities and outside the municipal limits of the Metros. Listed in both NSE and BSE, the company is currently trading at approximately Rs. 177 and has a market capitalisation of Rs. 5173 crores.

A journey to remember

DHFL has come a long way since its incorporation, especially in the last five years of operations. Its cumulative disbursements have risen from Rs. 19,739.76 crore in FY2011 to Rs. 78,631.72 in FY2015. For the same period, its profit after tax has grown to Rs.621.29 crore from Rs. 265.13 crore.  “Growth seen in the last five years has been a calibrated, measured and thoughtful execution of strategy which is not just meant for growing the topline but also improving internal processes and controls,” states Mehta. And this is the way the company expects to continue with its strategy execution from a growth perspective, keeping in mind how the revenue landscape at a macroeconomic level is shaping up.

However, considering its established track record as one of the leading players in the LMI segment, it is fully geared to meet any challenges be it in terms of industry or in terms of how it uses technology to enhance efficiencies and improve customer experience. The company will continue to focus on the large untapped potential in this segment especially considering the rising proportion of working age population (nearly 2/3rd of population is in the 15 to 64 years age group) and increasing nuclearisation of families. This apart, the borrowers in this group generally have lesser access to institutional sources of housing finance which the company is trying to solve.

Talking about challenges, Mehta says that getting the right set of people remains a challenge especially with credit, legal and diligence profile. From an industry perspective, in Tier 2 and tier 2 towns, irregularities in land records, non-digitisation and local regulations remain a challenge.

Competition has always been there and will continue to be there. In fact, it has helped in creating awareness and has led to more financially savvy customers.

Identifying business potential

In 2015, DHFL created separate business verticals enabling each vertical to focus on its core business, to drive profitability and customer satisfaction. Explaining this move, Mehta says, “With the changing requirement of customer and customer profile being different for each vertical, we reorganised ourselves to service them better.”

On the other hand, the company also recognised the fact that its customers were using loan against property or business loans to buy plant and machinery, medical equipment or upgrade their facilities. This is when its team immediately recognised that there exists a different set of customer who use the loan against properties for a different purpose and set up a the small and medium enterprise (SME) business in 2014 that catered to the expansion and other needs of the SMEs.

During the same period, on the liability side, the company ramped up its distribution channel so that they reach out to more people in smaller towns who have the option of placing their money in its AAA rated fixed deposits. “Even there we kept an eye on our customer requirements. We realised that many of them foreclosed the FDs due to some medical emergencies and we came with a new product called Wealth is Health,” recollects Mehta. This is an insurance product that helps one to draw against the fixed deposit without having to break it.

Evolution of marketing strategy

“When an organisation has good market share and has more business, but less people know you. This is a unique situation and that’s when we revamped our entire marketing strategy,” states Mehta. From a predominantly Western India focus (though it is present as across the country), the company embarked on a journey of brand transformation and hence, appointed Bollywood star, Shah Rukh Khan as its brand ambassador. Explaining why they chose him, Mehta, says, one of the key aspects of lending business is the fact that your buying house cannot be a dream forever it converts into reality at some point of time. That’s exactly the basis for choosing him as his journey of reaching this stardom is a testimonial to the fact that if you want to achieve something in life you can do it. “It is all about hard work and that is what we emphasise – stop dreaming and take action and buy a house,” states Mehta.

It also capitalised on the emerging digital and social media platform and evolved a strategy around that and embarked on a journey to increase its brand awareness. “while I am candid enough to say that not many customers are net savvy  but considering the fact that we are second largest private housing finance company, we have a huge stakeholders community watching us closely – be it investor, customer or be it research companies. And hence, we embarked on the digital space with active PR campaign,” says Mehta. The company went digital on Facebook, Twitter, Youtube and also used this digital medium to create awareness around basic things like what are top up loans?, what are the things to keep in mind while taking a home loan? , what is KYC? What is Cibil score?. It also made short animated films on social media to certain topics.   It also enhanced customer engagement on website through live chats and improved its call-centre set up for prospective and existing customers.

Competition, a must

“Competition has always been there and will continue to be there. In fact, it has helped in creating awareness and has led to more financial savvy customers,” states Mehta. Increased competition changed the way a customer looks for a loan and this increased awareness has not just supported growth of business, but it has also forced the organisation to sharpen their processes and have a focussed approach to customer service.

However, the company finds a way to differentiate itself from its competition. And that is through its approach to credit underwriting. “How your in-house team of legal and technical experts provide solutions to a requirement – be it resale or a new construction of own plot is a key differentiator. Are they  being a guide? Or are they merely acting as underwriters sets the tone apart. Explaining he says, “Often, a customer comes across situations where the property the customer is planning to buy may not be suitable from a legal or technical perspective. Our team helps them understand the risks and challenges in that particular transaction.”  The company’s credit and legal team appraise each application in-house which gives it a differentiated business model and strong risk management framework.

Where to from here? 

DHFL is all set to enter a new growth trajectory going forward by customer category, region and an expanding product portfolio. “When we launched different verticals on the business side, we made variants which define how we approach our clients. We have customers in Tier 2 and Tier 3 towns with different needs than customers in metro cities and we tailored products to suit the requirements of each customer,” says Mehta. On the fixed deposits side, the company plans to go beyond the metros. “We are seeing more customers move from traditional bank deposits to DHFL fixed deposits on the background of safety and combined with better yield,” says he.

Now the company is working towards strengthening its leadership levels and invest in talent and set second dimension of leaders professionally ready as it transforms the organisation into a young vibrant professionally driven organisation and use technology at the bank end.  In fact, the company tied up with NIIT and offer one year PG program after which it absorbs them in various capabilities in the organisation.

Considering the growing middle class and the “rurban” market (rural moving towards urban), the company believes that it has the right capabilities to act as a facilitator and convert them into buying a home.

Snapshot: DHFL

Founder: Late Shri Rajesh Kumar Wadhawan

Year: 1984

City: Mumbai

Profile: Affordable housing finance to the lower and middle income groups in semi-urban and rural parts of India.

Funding: Listed in the Bombay and National Stock Exchange

What Next?

• Plans to take fixed deposits product beyond the metros
• Strengthen its leadership levels and invest in talent
• Get second generation of leaders ready
•  Enhance backend, with technology