We met up with Mr. Atanu Bagchi, Chief Financial Officer of Canfin Homes in May 2014 to understand the turnaround in Canfin Homes and the business strategies of its management. Mr. Bagchi has vast experience in mortgage business and in its 20years association with Canfin Homes; he was posted in various branches across India. Superior product offering; prudent lending practices and efficient customer service has provided the thrust to the business momentum of Canfin Homes. Excerpts of our interaction with Mr. Bagchi
The low growth was due to a couple of reasons — Canfin Homes has always been conservative in its approach in terms of new business. That has in a way restricted our disbursement growth. Management is deputed from Canara bank and until current management; the tenor of previous management was shorter and Canfin Homes did not spread its wings in terms of reach. With the change in industry dynamics — from a seller’s market to buyer’s market — Canfin took time to change its approach towards sourcing business.
The focus and direction of the current management has played a pivotal role in the transformation.Canfin has also added branches — from 52 in FY12 to 83 in FY14. It also started new delivery channels such as appointing direct selling agents to push sales. We have also implemented a core-banking solution for faster, efficient, and real-time transmission of MIS.
Our workforce has increased from 252 in FY12 to 367 in FY14. With the addition of branches, delivery channel, and new workforce, today our turnaround time for individual mortgage loans has come down to 7-10 days compared to a month for comparative public sector banks. New product offerings,added distribution network, and improved efficiency will continue to provide the momentum to the business.
We offer an entire suite of mortgage products starting from plain-vanilla loans for home purchase home construction loans, loans for home extension/repairs/ renovation/up gradation to Loan against property. We give non-home loan products such as builder’s loans, loans on commercial property, loans on rent receivable, personal loans (top-up loans) etc. Home-loan portfolio constitutes 92% of our loan book while non-home loan is the balance. Average loan ticket size is Rs 1.6mn and 88% of the housing loan portfolio is towards salaried class. Southern region comprises 73% of our loan book size.
The process of loan approvals in the company is fairly decentralized with power to sanction the loans delegated at various levels in the management hierarchy. The power to sanction loans is well defined in the credit policy for various designations and for various products. Approval of proposals, which fall beyond certain limits (those that need the attention and decision making at higher levels) are referred to and sanctioned by a higher authority or management committee / the board of directors.
Given the business size, the Canfin Homes does not work on vertical platform. The sanctions at branches are done once the applicant fulfils all criteria mentioned in our predetermined credit policy. Any deviation has to be vetted by higher authorities at the head office. All the loan servicing can be tracked on a real-time basis. Auto alerts are sent to concerned branches and the head office for overdue loans. Follow-up process is initiated till the accounts are normalized.
The overall yield and spread is 11.3% and 1.7% respectively. Within this, the yield and spread in home loan portfolio stands at 10.95% and 1.35% respectively and in case of non-home loan portfolio,the same stands at 14% and 4.4% respectively.
Focus continues to remain on individual home loans and a balance will be maintained between home and non-home so as to maintain a decent spread and return ratio.
Our major source of funding comes from bank loans (52%); refinance from NHB (41%); deposits from public (3%); and debentures (4%). Bank loans are availed at a base rate ranging from 10.0-10.25%; average cost of refinance from NHB works out to be 9.6% and debentures are at 9.6%. The proportion of NCDs is expected to increase further.
The GNPA stands at 0.2% against the industry average of 0.7% and NNPA stands at 0%. The low level of GNPA is on account of Canfin Homes’ prudent loan-appraisal policies and timely follow-up at the beginning of overdue period. The decline in percent terms is due to higher loan book growth in previous few years, even in absolute terms the GNPA declined from Rs157mn in FY13 to Rs121mn in FY14 due to constant effort of recovery through Sarfaesi act, personal persuasion and OTS. Sustainability of such low level is practically difficult. However the endeavor would be to maintain GNPA & NNPA much below industry level.
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