Home loan rate war shows banks have nowhere to lend: Ajay Srivastava

We will see more and more of this happening because the sheer demand of loans has collapsed in the economy and that is the challenge for the economy and the banks, says Ajay Srivastava, CEO, Dimensions Corporate Finance.

There is a very aggressive home loan rate war out there. Kotak Mahindra Bank has reduced home loan rates to 6.65% till March 31. SBI is giving it at 6.70%, HDFC Bank and ICICI Bank at 6.8%. How are you reading into this? Would the ticket sizes of these home loans be much lower than pre Covid times?
It is an indicator that there is nowhere to lend. Most companies are able to access capital and they have realised that when capital is available at these valuations, why the hell borrow money? Let us dilute. So across the board, we see QIPs, PE fund raising, sale of companies. I do not meet a promoter who wants to borrow money at the end of the day. He is likely to raise capital and keep it in the bank.

The lowering of home loan rates come out of the sheer desperation of not having enough avenues to lend money to. How much can you lend money on personal loans, unsecured loans etc? That is not the smartest way to play the game. Historically, the housing loans have been the most stable platform for most of the institutions. HDFC ruled the roost and would continue to do so because their DNA and the cost structure are very different.

These banks will often come in, play the game and try to get you as a customer but all it tells you is that there are no borrowers of significant kind and they have run through individuals as borrowers because who wanted to borrow, you did not want to lend to and instead are targeting those who don’t want to borrow. So, it is very peculiar. You will see more and more of this happening because the sheer demand of loans has collapsed in the economy and that is the challenge for the economy and the banks. So yes, it is down there but not so much that we get excited.

Would you buy HDFC? It is a fantastic business but the stock is underperforming?
I do not think it is underperforming. The stock got rerated quite sharply. I have a holding in that stock and I do not sell it. It went from Rs 1,500 to Rs 2,800. It got back to Rs 2,500, if I am not wrong. It is an incredible franchise and they have done a remarkable job at doing two things -- balancing corporate real estate loans and individual real estate loans, doing side investment as well. And of course there’s the holding company. They hold the best bank in the country, the best life insurance company, the best AMC in the country. That is the India story at the end of the day.

What they do not have is Fintech in their portfolio. So, they have got a problem there. Maybe they will come in there through HDFC Bank. but There is no better surrogate for Indian economy than HDFC as an institution. The problem is it is so over owned as a stock that if FIIs decide to sell or one large FII decides to dispose it off, there will be a large correction in the stock.

As a retail person if you are starting your life, that is the stock I want to keep for my children’s education, for my retirement. It is in a separate category. Do not evaluate it day-to-day. Instead, 17 years from now, this stock should pay for your son’s education.