HDFC

What does the company do?

HDFC, was founded in 1977 as the first specialised mortgage company in India. Since then, HDFC has grown into one of the biggest providers of mortgage loans in the country, financing more than 7.5 million homes. It also has a presence in banking, life and general insurance and asset management where it holds direct stakes in market leaders. Why do we like the investment? The company has an extensive local distribution network exceeding 500 offices with outreach programmes to several towns and cities all over India. HDFC is managed conservatively with high underlying credit quality. This is illustrated by a conservative loan profile, where the average loan term is 13 years and customers are around 39 years old when they finance their first home. These qualities also make HDFC superior to its peers as a result of the well-managed asset and liability mix. We also like HDFC's solid management, under the charge of chairman Deepak Parekh and vice-chairman and CEO Keki Mistry. Its growth prospects are underpinned by positive market dynamics, supportive policy and favourable demographics. The housing mortgage market in India is structurally growing but underpenetrated, with mortgages comprising only 10% of gross domestic product. Government support, including incentives for developers to build affordable housing, is likely to improve affordability further. More broadly, the majority of India's population is below 35 years old, underscoring the large potential for home loans. Also, the number of households is rising with a shift towards nuclear families. Rising urbanisation would also boost housing demand. About 32% of the Indian population resides in cities, with that proportion expected to rise to 50% by 2030.