HBD Financial Services

About

HDB Financial Services (HDBFS) is a major Non-Banking Financial Company (NBFC) that serves both retail and commercial clients and caters to the expanding needs of an aspirational India. It is a Non-Deposit Taking Non-Banking Financial Company (‘NBFC’) which is of Systemic Importance.

They are a well-established company with strong capitalization, having been founded in 2008. HDBFS is a robust and reliable financial institution with CARE AAA and CRISIL AAA ratings for long-term debt and bank facilities, and an A1+ rating for short-term debt and commercial papers.

The current product portfolio mainly consists of Loans, Fee-based products and BPO services.

Loans

Consumer Loans: The company offers white loans (such as washing machines and refrigerators) as well as brown loans (such as televisions, audio equipment, and other comparable household appliances, among other things) and digital products ( such as Mobile Phones, Computer, and Laptops). The company also offers loans for personal usage. Gold loan, Consumer Durable loan, Auto loan, Personal loan, and Loan against Mutual Funds are all part of the Consumer Loans portfolio.

Enterprise Loans: Small and medium businesses require money for working capital, purchasing a new bid, or establishing a new factory. These SMEs can get secured and unsecured loans from HBD Financial Services.

Asset Finance: The company offers loans for the purchase of new and used vehicles, as well as vehicles that create income for the borrowers, such as trucks, tractors, and other agricultural equipment.

Fee-based products: The firm is a registered Corporate Insurance Agent, selling HDFC Life and HDFC Ergo Life and General Insurance products to clients.

Service for Business Process Outsourcing: The firm has partnered with HDFC Bank to collect debtors’ debts. The firm has established 15 call centres with a total capacity of 5000 seats across the country.

Collection Services: HDFC Bank has a contract with the company to run collection contact centres. The company has established 15 call centres with a total capacity of over 5,000 seats across the country. These centres handle collections for HDFC Bank’s whole range of retail lending products. Through its calling and field support teams, the company provides end-to-end collection services in over 750 locations.

HDFC Bank receives back office and sales help from the company, as well as back office, operations, and processing support.

Overview

The Indian economy had already been slowing for some time, as financial and real-estate pressures exacerbated each other. The Novel Coronavirus (Covid-19), which has been declared a pandemic by the World Health Organization (WHO), has put a long shadow over the Indian economy’s much-anticipated slight rebound in fiscal 2021. The Covid-19 pandemic, according to global and domestic rating agencies, will be an economic tsunami for the international economy. Even while India is unlikely to enter a recession, unlike the Eurozone, the United States, or Asia-Pacific, which have stronger trade links with China, the impact on India’s GDP growth is projected to be significant.

For the financial year 2020-21, the Asian Development Bank (ADB) expects India’s growth to decelerate to 4%. India’s gross domestic product growth is predicted to accelerate to 6.2 percent in FY22, thank to government reforms.

Due to the virus’s global spread, the economic impact will be more than just a slowdown from China, but also by weaker demand from other affected regions. India’s goods trade dependence on impacted nations is significant: the Eurozone, China, and the rest of Asia Pacific – all of which have seen their growth forecasts cut by at least 200 basis points so far – account for 48% of India’s exports and 50% of its imports. The slowing of GDP in these places is anticipated to have an influence on India’s trade and, as a result, growth.

Once the lockdowns are lifted and full economic activity resumes, it is expected that domestic demand would revive strongly.

The Union Budget 2020 focuses on long-term policy orientation, the agricultural sector, education, infrastructure, healthcare, financial services, and enhancing business ease of doing business and tax governance. There’s also a strong message about restoring people’s faith in the banking system by making proposals like decriminalising specific provisions in the Companies Act, 2013, re-examining other laws, fine-tuning the Contract Act, increasing deposit insurance, and creating a taxpayers’ charter in the statute to prevent harassment.

Industry Structure and Developments

Defaults by a significant NBFC and HFC in 2018-19 put a gloom over the NBFC sector throughout the year. During the first half of 2019-20, NBFCs experienced stress in their asset quality. The NBFC sector’s gross NPA ratio climbed from 6.1 percent at the end of March 2019 to 6.3 percent at the end of September 2019. However, between end-March 2019 and end-September 2019, the net NPA ratio stayed constant at 3.4 percent. The CRAR of the NBFC industry was 19.5 percent at the end of September 2019, down from 20 percent at the end of March 2019.

RBI has been announcing several initiatives to aid in liquidity flow into the system and should provide relief to NBFCs in response to the industry’s economic issues. The importance of NBFCs in loan intermediation is expanding; a significant NBFC’s default raised attention to NBFC asset-liability mismatches, which pose hazards to the NBFC industry and the financial system as a whole. To address these issues, the Reserve Bank mandated a liquidity coverage ratio (LCR) for all deposit-taking and non-deposit-taking NBFCs with assets of 5,000 crores or more (constituting 87 per cent of the total assets of the NBFC sector).

Opportunities and Threats

Lenders have used data analytics and data science to provide better client experiences through new-age underwriting models, seamless partner integration, and real-time loan decisions over the years. This provides NBFCs with an excellent opportunity to diversify their assets by remotely offering products that would otherwise require costly physical distribution. As NBFCs primarily serve the informal and self-employed borrower segments, they will be more affected by income instability at the customer’s end as a result of Covid-19′ lockdown and disruption.

In comparison to the previous year, commercial vehicle sales decreased by 31% in FY 2019-20. Sales of heavy commercial vehicles (HCVs) decreased by 50% year over year. India will transition to BS-VI vehicle emission standards on April 1, 2020. This is projected to raise new vehicle prices by 10% to 15%. The bright lining is that existing vehicle owners are likely to witness a speedy recovery due to the slower addition of new assets and the necessity to service pent-up demand following the lockdown.

New opportunities in public health and remote working are likely to emerge as a result of the lockdown. Due to the extensive use of technology tools as a result of the shutdown, technology adoption in payments and customer interactions is anticipated to accelerate. Lenders will be able to distribute items more efficiently as a result of this. Technology, on the other hand, is expected to challenge some organisations’ old business strategies.

The Reserve Bank of India (RBI) announced various measures on March 27, 2020, to relieve the financial crisis generated by COVID-19. All lending institutions were given permission by the RBI to allow a three-month pause on instalment payments on all term loans outstanding as of March 1, 2020.

In accordance with the RBI COVID Regulatory Package, the company granted its clients a loan payment moratorium based on a Board-approved policy. In the case of borrowers that received asset categorization as a result of the moratorium, the company has made preparations for projected credit loss on a cautious basis.

Management

Ramesh Ganesan (MD & CEO):

At HDB Financial Services Ltd, Ramesh Ganesan is the Chief Executive Officer, MD, and Director. Ramesh Ganesan Mr. Ganesan previously worked for Intelenet Global Services Pvt Ltd, where he held the post of Chief Operating Officer.He pursued his MBA from Jamnlal Bajaj Institute of Management Studies.

Aditya Puri (Chairman):

Aditya Tapishwar Puri, the founder of HDFC Bank Ltd., is a board member of Stelis Biopharma Pvt Ltd. and Chairman of HDB Financial Services Ltd., as well as an Associate Member of The Institute of Chartered Accountants of India and a Merger at Centurion Bank of Punjab. He was previously the Chief Executive Officer of Citibank Bhd and Executive Director of HDFC Bank Ltd. and Times Bank Ltd. (a subsidiary of HDFC Bank Ltd.). Mr. Puri graduated from the University of Punjab with a bachelor’s degree.