Housing Development Finance Corporation Ltd Q4 FY23 Earnings Conference Call Insights

Key highlights from Housing Development Finance Corporation Ltd (HDFC) Q4 FY23 Earnings Concall

Management Update:

• [00:02:35] HDFC said it had its highest monthly individual disbursements in March 2023.

Q&A Highlights:

• [00:31:52] Suresh Ganapathy of Macquarie Capital asked about the warrants expiring on Aug. 10, if the merger happens in July. Keki Mistry CEO said warrant holders will receive HDFC Bank shares instead of HDFC Limited shares in a 1.68:1 ratio due to the merger.

• [00:34:52] Suresh Ganapathy with Macquarie Capital enquired what proportion of term loans, deposits, and bond market borrowings will mature in the next 12 months based on the ALM pattern. Keki Mistry CEO replied that roughly INR10,000-15,000 crores of various borrowings will mature every month.

• [00:35:21] Suresh Ganapathy from Macquarie Capital enquired about the future for HDFC Credila. Keki Mistry CEO answered that HDFC will engage with RBI to resolve onboarding new customers and will update once there is clarity. HDFC is willing to reduce its stake from 100% to 10% and are receiving bids.

• [00:36:35] Mahrukh Adajania with Nuvama queried about the gross liability mobilization during 4Q23. V. Srinivasa Rangan ED said the net gross mobilization of liabilities across all products is INR85,000 crores. And the total contractual maturity of the book will be ranging from about INR10,000-15,000 crores every month.

• [00:40:34] Mansi Sajeja from SBI Funds asked how is interest rate risk managed for INR78,000 crore in liabilities and recent bond issues, and how will fundraising approvals be handled now that they will be transferred to a bank. V. Srinivasa Rangan ED said that of the total INR5,50,000 crore in liabilities, INR2,20,000 crore are managed through swaps converting from fixed to floating and INR1,00,000 crore are linked to market benchmarks. About INR3,40,000-3,50,000 crore in liabilities are linked to external or banking benchmarks.

• [00:42:59] Adarsh Parasrampuria from CLSA asked if the rundown of corporate loans is largely complete or is there still more to go. Keki Mistry CEO replied that the rundown of corporate loans is significantly done with only a little bit more to go.

• [00:43:26] Adarsh Parasrampuria from CLSA enquired about the size of the PSL compliant book on the balance sheet as of March-end. Keki Mistry CEO answered that the size of the PSL compliant book on the balance sheet is roughly about INR1,10,000 crores.

• [00:44:03] Adarsh Parasrampuria from CLSA asked about the duration increase for bank loans and bonds over the last 6-12 months, given the issuance of many long-term bonds. V. Srinivasa Rangan ED replied that the current year’s gross borrowing includes NCDs for almost 100 months and bank loans for an average of 15 months. As bank loans mature, they are being negotiated for longer periods. By the time of the merger, some borrowings will be converted into longer-term. An ECB was raised for about 42-43 months and deposits are close to 3-3.5 years.

• [00:47:48] Vivek Ramakrishnan of DSP Mutual Fund asked how much SLRs are currently held and how much needs to be built up by the time of the merger with HDFC Bank, which has excess SLRs. V. Srinivasa Rangan ED said the SLR is about INR63,000-64,000 crores plus cash. The requirement on the balance sheet is about INR1,00,000 crores. The bank holds a higher LCR of about 110%, which translates to about 22-23% from an LCR perspective.

• [00:51:10] Pooja Kabra from Sahasrar Capital enquired about the attrition rate at the management and a step lower level and ESOP provisions. V. Srinivasa Rangan ED replied that the attrition rate is zero. ESOP provisions is around INR200 crores per year.

• [00:53:51] Rakesh Kumar from B&K Securities asked if the longer-term borrowing is being done for maintenance of NSFR for HDFC Bank post-merger or for short-term liquidity. V. Srinivasa Rangan ED replied that the borrowing is not for short-term liquidity. Interest rates are flat whether borrowing for 1 year or 10 years. Assets are typically longer-term and need to be funded with longer-term liability. Borrowing short-term also affects the LCR.

• [00:57:21] Anand Dama from Emkay Global asked about the status of the wholesale book, which includes production construction developer finance year book, when merger happens. Keki Mistry CEO said that construction finance loans continue into the bank. Disbursements are linked to the stage of construction and come over a longer timeframe. There is a healthy pipeline for construction finance deposits. Disbursements have happened this quarter and will continue.