Housing Development Financial Corporation Ltd
Group 2 - Crew 6
Jai Singhal - F061
Gazal Jain - F024
Gautam Maitreya – H033
The problem involves identifying the financial strategy of Housing development finance corporation ltd and indicating how this strategy differentiates HDFC from its competitors. HDFC has recently announced that it will be raising approximately 5000 Cr from the market by simultaneously issuing NCDs and warrants. How will HDFC use these 5000 Crores and how will this method of raising money affect the value of HDFC is to be evaluated. Also other methods that can be used to raise these 5000 crores need to be identified.
Historical Background: …show more content…
22.8% of shares in HDFC Bank. HDFC Bank sources home loans for HDFC for a fee. The key business areas of HDFC bank are wholesale and retail banking and treasury operations. On 31 March 2013, its market capitalisation was INR 1.5 trillion (US$ 27.31 billion), making it India's seventh largest publicly traded company.
HDFC holds approx. 72% of shares in HDFC Life. Standard Life holds 26% shares. In September 2013, it was ranked third in terms of market share of private life insurance companies in India. On the same date, it had a network of approx. 72,000 financial consultants to sell its policies.
HDFC formed this Mutual fund Company with Standard Life Investments and holds approx. 60% of its shares. It manages 44 schemes comprising debt, equity, exchange traded fund and fund of fund schemes. Average assets under management (AUM) as at the end of September 2013 were INR 1.07 trillion. It is ranked first in the industry in India on the basis of Average Assets under management.
HDFC formed this General Insurance Company with ERGO Insurance Group. HDFC holds 74% and ERGO holds 26% of the shares. By the end of September 2013, its Market share in General Insurance stood at 4.1% (overall) in terms of gross direct premium in first half year of FY 2013-14. The total employee strength of the company as on March 31, 2013 was …show more content…
3) HDFC takes up shorter term borrowings of usually upto 5 years, thus reducing financing costs. Also it does not default on its payments.
At the same time, it has a steady level of prepayments.
A final aspect of a financial strategy is asset management. The financial strategy puts the company's financial resources to work where the benefit is greatest. It examines whether it makes sense to buy a building or rent it, and looks at whether the company should own or lease equipment.
1) HDFC has a conservative loan profile due to its high credit quality
2) Liquidity risk and interest rate risks arising out of maturity mismatch of assets and liabilities are managed through regular monitoring of the maturity profiles.
HDFC does not generally take an interest rate mismatch. HDFC’s loan book is predominantly floating rates, whereas liabilities, especially deposits and NCDs are fixed rates. In normal economic conditions, the fixed rate liabilities are converted into floating rate denominated liabilities by way of interest rate swaps.
HDFC monitors the money market conditions and enters into interest rate swaps at an appropriate time to minimise the interest rate