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loan for MIG2 for house measuring upto 110 sq. meters.This measure is likely to boost demand for affordablehousing in a significant way.Although demand for affordable housing had alwaysbeen there, it was the deficient supply that was creatinga mismatch. For the first time ever, we now have asituation where both demand side and supply sideforces will push the market equilibrium higher.Regulatory support – The RBI recently lowered the riskweights for housing loans between Rs. 30 lakhs andRs. 75 lakhs to 35% from earlier level of 50% and forhousing loans above Rs. 75 lakhs to 50% from earlierlevel of 75%. Standard asset provisioning requirementwas also lowered to 25 basis points from earlier levelof 40 basis points. These measures are likely to free upcapital for banks, HFCs and other NBFCs and lowerinterest rates on home loans.Growth drivers for housing financeThe aforementioned factors stack up very well with thelist of growth drivers for housing financeRapid urbanization - Millions of people are moving tourban areas every year in search of a better livelihood.Studies show that there is a strong correlation betweenGDP growth and urbanization of the country. It is not asurprise that 32% urban population of India contributesto over 60% of country’s GDP. Urbanization will push updemand for housing in peripheries of large cities andcause a horizontal increase in aggregate urban area.Successful implementation of government’s SmartCities Mission will help the cause.Favorable demographics - Median age of Indianpopulation is just 28 years and about 87% of thepopulation is less than 55 years old. A young populationis more likely to take on long term loans like housingloan.Massive shortage of housing units - At present, thereis a shortage of about 19 million housing units in urbanIndia and about 15 million units in rural India. As perreports, an investment of Rs. 1 trillion is required over thenext 5-7 years to fill the inadequacy in India’s housingsector and infrastructure. This presents an incredibleopportunity to organized players in the housing financesector to maintain excellent credit growth for years tocome.Governmental push toward digitalization Digitalization will aid in track record creation and makemore people eligible for getting organized finance;including housing finance.Poor mortgage penetration - Low mortgage to GDPratio of sub-10% points to significant under penetrationand available opportunities in housing finance to bringthe ratio at par with global average, which is inevitableto become a developed nation.Low interest rates - Benign interest rates improveborrowers’ ability to take home loans and boostdemand for housing finance.Tax sops for home buyers - Home loan principalrepayment upto Rs. 1.5 lakhs and interest paymentupto Rs. 2 lakhs are eligible for tax deduction. Firsttime affordable home buyers will receive an additionaldeduction of Rs. 0.5 lakhsGrowing economy - With Indian economy growing indouble digits nominally, income of the population isalso rising. Rising incomes is expected to continue todrive the demand for housing.ChallengesAlthough steps are being taken, the followingchallenges, to name a few, remain at presenta) Insufficient supply to meet the demand in affordablehousingb) Very limited availability of long term finance atcompetitive interest ratesc) Absence of liquid corporate debt marketd) Delay in project approvalsThreatsAlthough government is addressing most of thechallenges noted above, a prolonged slowdown inglobal and local economy remains a major threat todemand for housing finance along with rise in globalpolitical instability, infrastructural bottlenecks, risein inflation and subsequently rise in market interestrates can reduce the demand for houses and housing9

finance, fall in underwriting standards owing to rise incompetition may present asset quality woes later on.Corporate OverviewThe company is present in 2 segments – individualhome loans and loans against property (LAP). Thecompany provides a variety of tailor-made home loanproducts to individual borrowers in both salaried andnon-salaried (self employed professional and selfemployed non-professional) segments to suit variousrequirementsFor construction or purchase of house property Repco Super Delight Loan Repco Super Premium Loan Repco Rural Loan* Dream Home Loan Super Loan* Fifty Plus Loan NRI Housing LoanFor Repair and Renovation/ Extension of existingproperty Home Makeover Loan Super Loan* Repco Rural loan*For purchase of plots Plot LoansFor loans against property Prosperity loan New Horizon Loan Commercial Real Estate (CRE) Loan* Overlapping multi-purpose productsGeographic Presence157 points of presence comprising of 125 branchesand 32 satellite centers; presence in 11 states and aunion territory; focus on direct sourcingDuring the year, the company converted 8 satellitecenters into branches, opened 2 new branches and 4new satellite centers, taking the total network to 125branches and 32 satellite centers. The company didn’tventure into a new state during the year with a viewto consolidate in existing regions. The retail network isspread across states of Tamil Nadu, Karnataka, Andhra10Pradesh, Telangana, Kerala, Maharashtra, Odisha,West Bengal, Gujarat, Madhya Pradesh, Jharkhandand the Union Territory of PuducherryState-wise retail networkTamil NaduAndhra ishaPuducherryWest BengalMadhya PradeshJharkhandTotalMar 177815692091321211157The company’s primary sources of customer acquisitioncontinue to be loan camps, customer walk-ins andreferrals. Of these, loan camps contribute to over 60%of incremental originations. Manager of every branchconducts a loan camp once in every 2-3 months where,a primary assessment of customer documents is doneand an in-principle sanction given. The customer thenapproaches the branch for further processing of his/her loan. The branch personnel act as single point ofcontact to customers and are responsible for sourcingloans, carrying out preliminary checks on the creditworthiness of potential customers, providing assistancein documentation, disbursing loans and monitoringrepayments and collections. This way the companyensures that there is no conflict of interest and level ofaccountability is very high. The compensation structureof branch personnel is designed in such a way that30% of monthly compensation is variable and is paidout based on the performance of employees in, amongother things, disbursement growth, loan book growthand collections.The company employed direct sales agents (DSAs)in some branches of Tamil Nadu, Maharashtra andGujarat during the year and is open to using the DSAmodel in new and existing geographies if it makeseconomic sense. The share of DSA driven businesscontinues to be less than 5% of total incrementalbusiness.

Result of Operations I ncome from operations during the year stood atRs 1,044.0 Crs up 19% from last year Other Income stood at Rs.1.7 Cr Net interest income was Rs 367.8 Crs, up 21% AT was Rs. 182.3 Crs, up 21% from the previousPyear. ost to Income ratio stood at 16.9%, down 2.4%Cfrom last year. anctions and disbursements were Rs. 2,875.8 CrsSand Rs. 2,642.4 Crs respectively GNPAs stood at 2.6% and NNPAs at 1.4%, resultingin a PCR of 47.3% he average yield earned on loan assets duringTthe year was 12.2% he average cost of borrowings during the yearTwas 9.1% he interest spread earned during the yearTexpanded to about 3.1%.1200 –200 –50 –FY 15400 –FY 1725.0% –21.0%20.0% –19.3%16.9%15.0% –10.0% –5.0% –0% –FY 15FY 16FY 17Cost to income ratio200 –182175 –150150 –693FY 16Net Interest Income882600 –125 –123100 –75 –50 –200 –0–237100 –Rs. CrsRs. Crs800 –250 –150 –10461000 –304300 –0– oan book increased to Rs 8,939.9 Crs, registeringLa growth of 16% year on year 350 –Rs. Crs 368400 –Rs. CrsThe company reported satisfactory performanceand demonstrated its ability to create value for itsstakeholders even during uncertain times. The loanbook grew at a decent rate given the macroeconomicconditions. However, profitability metrics remainedrobust even as the asset quality deteriorated inresponse to external shocks.25 –FY 15FY 16Total IncomeFY 170–FY 15FY 16FY 17Net Profit11

30,82830,000 –601325,000 –Rs. CrsRs. Crs35,000 –76918,000 –6,000 –Sanctions and Disbursements (Rs in crore)894010,000 –4,000 –20,000 –23,98928,51228,758 26,42421,81215,000 –10,000 –2,000 –5,000 –0–FY 15FY 16FY 170–FY 15FY 16SanctionsLoan BookFY 17DisbursementsComposition and mix of the loan book100% –100% –80% –80% –60% –56.8%58.8%60.2%40% –20% –0% –41.2%39.8%FY 15FY 16FY 17SalariedNon-Salaried19.8%20.2%80.8%80.2%79.8%FY 15FY 16FY 1760% –40% –43.2%19.2%20% –0% –Individual Home LoansLoans against propertyOthers 2.5%Andhra Pradesh 7.0%Telegana 3.7%Gujarat 2.1%Karnataka 12.2%Kerala 3.8%Maharashtra 6.4%Tamil Nadu 62.2%12

Productivity metrics28.0 –30.0 –26.823.022.622.0 –Rs. CrsRs. Crs20.0 –24.0 –15.0 –5.0 –FY 15FY 160–FY 17Average Sanction / Branch (Rs. Crs)80.0 –56.74.8 –Rs. CrsRs. Crs30.0 –4.6 –4.4 –4.34.0 –10.0 –3.8 –FY 15FY 16FY 17Average Loan / Branch (Rs. Crs)FY 15FY 16FY 17Average Sanction / Employee (Rs. Crs)4.8 –16.0 –4.64.6 –14.0 –12.0 –Rs. Crs4.4 –Rs. Crs4.44.2 –20.0 –4.2 –4.012.413.3FY 16FY 1711.010.0 –8.0 –6.0 –3.93.8 –3.6 –FY 175.05.0 –40.0 –4.0 –FY 165.2 –66.950.0 –0–FY 15Average Disbursement / Branch (Rs. Crs)71.570.0 –60.0 –21.120.610.0 –20.0 –0–24.825.0 –26.0 –4.0 –2.0 –0–FY 15FY 16FY 17Average Disbursement / Employee (Rs. Crs)FY 15Average Loan / Employee (Rs. Crs)13

Borrowing ProfileCredit RatingThe company has diversified its sources of fundingacross five verticals viz. refinance from NHB, longterm bank loans, working capital loan from RepcoBank, non-convertible debentures (NCDs) andcommercial papers (CPs).The company’s short term and long term debtfacilities are rated by two rating agencies – CARERatings & ICRA.As of 31st March, 2017, 62.9% of company’s borrowingswere from banks, 15.5% by way of refinance from theNational Housing Bank (NHB), 6.6% from Repco Bank,10.4% from NCDs and 4.6% by way of CPs. In orderto meet liquidity requirements, the company tookadvantage of favorable rates available in the moneymarket by issuing CPs to the tune of Rs. 1400 Crs duringthe financial year. The total outstanding borrowingsstood at Rs.7,560.4 Crs as against Rs.6,537.9 Crs at theend of FY16.Going forward, if the prevalent low interest rate scenariocontinues, the share of NCD and CP borrowings islikely to go up to be offset by declining share of bankborrowings.As of March 31, 2017, 20.4% of overall borrowings wereon fixed rate basis and 79.6% floating rate basis. Theaverage tenor on borrowings was 7.7 years.Source (Rs.Crs)Rs. CrsNational Housing ble Debentures78510.4%Commercial Papers3504.6%7,560.4100.0%Repco BankCommercial BanksTotal14.0% –12.5%12.4%12.2%9.6%9.4%9.1%12.0% –10.0% –8.0% –6.0% –4.0% –2.9%3.0%FY 15Yield14FY 16Cost of BorrowingRating agency ICRA maintained AA- rating assignedto company’s term loan and non convertible debenturefacilities and A1 assigned to company’s commercialpaper facility.Capital AdequacyRHFL’s capital adequacy ratio (CAR) as at March 31,2017 was 21.3% consisting entirely of Tier-1 capital.Over the medium term, the company has plans tosecuritize its loan assets and issue Tier-2 bonds (asand when required) to maintain its capital adequacyto support its growth ambitions.Asset QualityOver the years, the company has developed robustrisk management systems & processes in all areas ofoperations like loan origination, credit appraisal, loandisbursement and collection & recovery.Cumulative write down of only about Rs. 6 Crs till datebears testimony to the aforementioned statement.However, given the tilt of the loan book towards theunsalaried segment and focus on Tier 2 & 3 areasof the country, the asset quality of the book exhibitsvolatility intra-year. The ebb and flow of asset qualityshowed an aberration in FY17 owing to a Tamil NaduState specific factor (interpretation of Madras HighCourt order pertaining to registration of unapprovedplots) and the macroeconomic impact of the landscapealtering demonetization drive.3.1%2.0% –0–In FY17, credit rating agency CARE Ratings maintainedthe AA rating assigned to company’s term loan andnon-convertible debenture facilities. Company’scommercial paper facility continues to enjoy A1 ratingby CARE Ratings.FY 17SpreadGross non-performing assets (GNPA) and net nonperforming assets (NNPA) quickened to 2.60%(Rs.232.8 Crs) and 1.39% (Rs.122.7 Crs) respectively

140 –2.60%Rs. Crs200 –150 –1.32%1.31%0–79.1100.9232.8FY 15FY 16FY 17Gross NPA120 –– 2.50%100 –– 2.00%80 –– 1.50%100 –50 –– 3.00%Rs. Crs250 –– 1.60%– 1.40%– 1.20%– 1.00%– 0.80%60 –– 1.00%40 –– 0.50%20 –– 0.00%0–Gross NPA%1.39%– 0.60%0.48%0.50%– 0.40%29.836.8122.7FY 15FY 16FY 17Net NPA– 0.20%– 0.00%Net NPA%as on 31st March 2017 as compared to 1.31% (Rs.100.9Crs) and 0.48% (Rs.36.8 Crs) in the previous year.The provision coverage ratio stood at 47.3% at the endof FY17.InvestmentsThe company invested Rs.3.2 Crs in Repco Microfinanceduring the year. Total investments in Repco Microfinanceas on March 31, 2017 stood at Rs. 15.6 Crs.As on March 31, 2017, RHFL had 60.2% loan bookexposure to non-salaried segment (consisting ofprofessionals and non-professionals). Generally,income profile of the non-salaried segment tends tobe lumpy which leads to significant quarter-on-quartervolatility in NPAs. However, such volatility in NPAprofile is not representative of the true asset qualitygiven conservative underwriting policies of theCompany.Performance SummaryRatio of income and expenses to average loan assets(ROA Tree)MetricFY15FY16FY17Net interest margin4.5%4.4%4.4%Other income0.4%0.5%0.4%Non-interest expenses1.0%0.9%0.8%Credit cost0.4%0.6%0.6%Income Tax1.2%1.2%1.2%Return on assets2.3%2.2%2.2%CAGR26%21%20%27%29%24%30%25%5 year historical performance at a glanceParticularsOutstanding Loan BookSanctionsDisbursementsIncome from OperationsNet Interest IncomeProfit after taxNetworthDebtRatiosNet interest marginGross NPANet NPAReturn on assetsReturn on equityCRARUnitsRs mnRs mnRs mnRs mnRs mnRs mnRs mnRs .42.218.221.315

Risk ManagementInterest rate riskThe company’s business activities expose it to avariety of risks including credit risk, operational riskand interest rate risk. Risk management forms anintegral part of company’s business. The objective ofthe Company’s risk management system is to measureand monitor various risks and to implement policiesand procedures to mitigate such risks.The Company has formulated an asset liabilitymanagement (ALM) policy, which lays downmechanisms for assessment of various types of risks andaltering the asset-liability portfolio in a dynamic way tomanage such risks. There is an on-going monitoringof the maturity profile of assets and liabilities by AssetLiability Management Committee (ALCO) - a strategicdecision making body constituted by the Board, tomitigate the risks arising from cash flow mismatches,comprising of the Managing Director, Executive Directorand Chief Financial Officer of the Company.Rigorous credit appraisal keeps credit risk in checkThe 2-tier credit appraisal process – at branch and headoffice level – ensures high level of checks. A preliminaryappraisal is performed by the branch manager, branchlevel valuers and lawyers. This again is revalidatedat the corporate office level before sanction. Eachborrower is rated based on a dynamic credit ratingmodel comprising of 18 parameters carrying differentweights. The interest chargeable is linked to the creditscore. The company maintains a conservative loan tovalue (LTV) and documented installment to incomeratio (IIR) on the loans. The average LTV was 61% atthe forced sale value and average documented IIR was38% as on March 31, 2017.At any point in time, an optimal balance between shortterm and long term borrowings is maintained in syncwith extant asset and liability profile. Most of the longterm borrowings and on-lending happen at floatingrates, which act as a hedge in times when interest ratevolatility is high.Strengths, Weakness, Opportunities &ThreatsStrengths here are abundant opportunities to tap in theTaffordable housing space the company is presentin. More so, in the backdrop of governmental focuson affordable housing or the first time ever we have a situation whereFsupply side bottlenecks in the affordable housingspace have been taken care of by giving financialsops to developers ocus on tier II and tier III cities and peripheralFareas of tier I cities results in less competition frombanks and other HFCs leading to possibility of highadvances growth he company has over the years gained significantTinsights in underwriting the risks involved inlending to non-salaried class, which is highlyunderpenetrated, relatively less competitive andoffers higher yields epco Bank, which is the promoter of Repco HomeRFinance and holds 37.13% stake in the companyOperational risk is mitigated using various toolsAn ongoing monitoring of loan accounts is ensuredalong with inspection of each branch by an internalinspection team and risk based audit by an externalaudit firm at regular intervals. Concurrent audit is doneat key branches identified in terms of loans outstanding.Senior company officials also make surprise visits tobranches to check if all processes and best practicesare followed.To improve operational efficiency, quarterly Board leveldiscussions are held on reports shared by recoveryofficers, external audit firm and vigilance officer, whooversee monitoring of company’s offsite transactionsand Know Your Customer related compliance. Newlearning is put to use immediately.Performance review of all branch personnel isundertaken twice a year by senior management team.It is a platform where performers are rewarded in frontof all employees and others are motivated to do theirjob efficiently.16is a well-recognized name in south India and hasbeen in operation for more than 48 years

roven track record of containing loan losses atPvery low levels ean operating cost structure –3-5 employees perLbranch on average, lower rentals in tier 2/3 cities,minimum commission expenses, etc. trong growth in advances and strong margins.SReturn ratios of the company remain strong. Strong Tier 1 capital position; CAR – 21.3% xpanding footprint – sowing the seeds for theEfuture ousing finance sector opportunity driven byHincreasing urbanization, housing shortage, youngpopulation of the country, nuclearization of familiesand low mortgage penetration resence in segments and marketsPunder-served by formal credit institutions egulatory clamp down on willful defaulters andRother measures like

Home Finance REPCO HOME FINANCE LIMITED. (Promoted by Repco Bank-Govt. of India Enterprise) CIN : L65921N2000PLC044655 r RIIFL/SE/40/2016-17 . Deutsche Bank Federal Bank HDFC Bank Limited ICICI Bank IDBI Bank Limited IDFC Bank Limited Indian Bank