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HDFC to foray into consumer finance

Shareholders of the Housing Development Finance Corporation Limited today approved the company's proposal to foray into personal finance segment. The plan is to extend loans for buying consumer durables including automobiles and to finance urban infrastructure and related projects.

The shareholders also permitted the HDFC management as directed by the Securities and Exchange Board of India, to make amendments and resolutions with regard to the Employee Stock Option Plan or ESOP. As per the SEBI guidelines, a clarification was sought on the maximum number of shares proposed to be granted to any single employee under the ESOP. Each employee's share will be subject to a maximum of five per cent of the total number of shares available under the plan.

Addressing the 22nd annual general meeting, chairman Deepak Parekh informed the shareholders that the company would shortly extend consumer loans to the general public. Initially, the existing borrowers with good repayment track record will be given priority.

With part divestment of its holdings in Countrywide Consumer Financial Services in favour of GE Capital, HDFC is now exploring the opportunity to offer consumer finance products in addition to mortage-related products.

This will include financial assistance for various purposes including consumer durables, furniture, fixtures and vehicles.

Recently, the corporation introduced an adjustable rate home loan product. It also raised a sum of Rs 2.25 billion through a private placement of non-convertible debentures through book building process.

With a high capital adequacy ratio of 16.2 per cent, Parekh said that this became a drag on the return on equity which was not growing at the desired levels and was a matter of concern both to the shareholders and also to the management.

In this context, he indicated that the company would consider buying back its own shares at an appropriate time in accordance with the recent amendments to the Companies Act and the regulations prescribed by the Sebi. If required, HDFC would call an extraordinary general body meeting to seek shareholders' approval.

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