Housing Development Finance Corporation Ltd. (HDFC) is offering privilege rates to its existing borrowers, which have a good track record. The security for the loan will be the property, which is already mortgaged with the institution.
HDFC (FY99 Total Income Rs 17.5 bn) is the largest housing finance company in India with a 55% market share. HDFC operates 41 offices and has a field force of more than 42,000 commission agents who mobilize retail deposits.
The decision by the company to venture into consumer durable financing is a logical extension of its existing business. The company is initially targeting only existing customers with the new product.
The advantages pertain to the lower costs that would be incurred on customer evaluation and credit rating. Moreover, with the security already mortgaged with the institution, the risk of default and the subsequent loss is negligible.
Though the durable financing involves higher risks, the company is treading with care by first offering the product only to existing customers. However, in the longer term, given the high level of competition in the industry, the margins are likely to be thinner.
The stock has always been a favorite of analysts and fund managers as it has an excellent asset quality and a good management. The FIIs have already exhausted their 30% investment limit in the company.
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