OUR-WORLD-Vol-VII-Issue-8.Pdf
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EDITORIAL had a chance to check out these channels. said our MD, Mr Aditya Puri. “While we continue to FROM STRENGTH TO STRENGTH We are always looking for ways to better pray for their speedy return to normalcy, we hope connect with our audience, so if you have any through our efforts, we are able to make a small As we go live with this issue on September Valuable Brand, with a brand value of $21 feedback, do hit the feedback forms or write in but meaningful impact on people’s lives as they 7, we’re delighted to share not one but two billion, up 21% from last year. to [email protected] come out of their suffering.” major achievements for our brand that have been announced today. Our MD, Mr Aditya Puri, while accepting the In this issue, we also feature an exclusive interview Taking cue from our MD’s message, colleagues honour from The Economic Times on behalf with Mr Ashok Khanna, Group Head – Auto contributed a day’s salary to the cause. The Bank HDFC Bank has been recognised by the of the Bank, said, “It's a great honour and Loans, as our cover story. Mr Khanna he takes us then contributed the rest to donate a total of Rs country’s premier business daily The Economic I accept it with humility on behalf of all my through the journey of our Auto loans business. 10 crore to the CM’s Relief Fund. As donations Times as the ‘Company of the Year’. Each year a colleagues at the Bank, without whom this You can read the interview on page 5. poured in from across the country and the world, jury comprising well-renowned industry leaders would not have been possible. I'd also take online payment gateways became a convenient, picks a single company for this honour after the opportunity to thank all our customers A high of the month was our country’s fabulous quick way to make donations. In fact our Bank’s much deliberation and debate. They chose our and stakeholders who've reposed their faith show at the Asian Games. Our compatriots gateway emerged as the top gateway in terms of Bank from a galaxy of equally meritorious peers in us throughout.” picked up a whopping 69 medals. We bring to collections with over `3,000 crore contributed. stating that it was a tribute to its “status as a you a special on page 35. global benchmark for successful banking.” These announcements are fresh off the press Most recently, our Bank announced that it would so keep checking back here for more the Helping rebuild lives adopt 30 villages. This is in keeping with our An equally exciting announcement was pictures and coverage. We’ll also be sharing Kerala has started it gradual return to normalcy endeavour to bring about ‘Parivartan’ or long- made by Kantar Millward Brown, a group all the updates via the OUR WORLD Live after the devastating floods last month. As a lasting positive change in the communities we company from the global communication and Feed, the OUR WORLD Homepage, and socially responsible corporate citizen, our Bank serve. You can read more about how we are advertising behemoth WPP. In their latest of course, OUR WORLD Radio, the newest has lent its support in myriad ways. “We stand helping rebuild lives on page 49. survey they named HDFC Bank India’s Most channel on this platform. We hope you’ve with the people of Kerala in this hour of distress,” like comment COVER STORY greatness. The road to the top was difficult – one that took determination and foresight on the part of the team to just stay in the business. Our Bank set up its Auto Loans business LEADING THE in 1999-00. “In the initial years, we did not make money because the distribution costs were prohibitive,” says Mr Khanna, who has been spearheading this vertical for over a RACE decade and a half. Our Bank is the frontrunner in the Auto Loans business. Mr Ashok Our Bank, given its nascent entry in the business, was financing auto loans at extremely Khanna, Group Head – Auto Loans, in this interview with Our World, competitive interest rates, leaving scope for little margins. That was the market reality of talks about the journey so far the time. Further, the dealer distribution costs were as high as 5-6 per cent then. Adding to and the road ahead this were operating costs and portfolio delinquencies which meant that the Bank was not making money. Slowly and gradually, the industry saw the demise of large players and a host of NBFCs in the business due to non-profitable operations. Despite this, our Bank stayed invested. “It was in 2006 that we reached an inflection point, a now or never moment, so to speak, ” adds Mr Khanna recollecting the tough decision the Bank took that led to a short-term storm, but paved the way for the entire industry reeling under high distribution HDFC Bank today is the market leader in auto loans costs. – two-wheelers, four-wheelers and commercial vehicles (CV). But the road wasn’t easy. “We took the call to not offer more than 2 per cent distribution fee which met great consternation and objection from OEMs and distribution channels, far and wide. But we watch video As Roman philosopher Lucius Annaeus Seneca were clear: it was in their best interests that we do it, so we all survive.” Note: The video will only play on Internet said: It is a rough road that leads to the heights of Explorer version 8 and above Riding the storm been adjusted for inflation,” shares Khannaji. We fund close to 0.7 million cars a year and After the Bank stood its ground, it lost business for a few months, but soon enough, other over 1 million two-wheelers - unheard of in this industry. players followed suit and reduced the distribution fee to similar levels. There has been no looking back since. “From that point till this day, we have led the industry standard on the Building on relationships key metrics of the business,” shares Mr Khanna, who’s also fondly addressed as Khannaji, Back then, the Bank had no distribution at all – every dealer had to be targeted and across the industry. relationships built from scratch. Those relationships have been carefully cultivated and have stayed till today. Most of those dealers have continued and become bigger brands Automobile manufacturers (OEMs) too were compelled to back our decision because and multiple brand affiliates. “A lot of what we do is based on relationships,” highlights they realised that financing was going through a major overhaul. Vehicle sales are driven Khannaji. “A lot of our senior-level and middle level people have been involved with them on the back of finance. And with the financing penetration of 75-80 per cent in a country from when they were starting out – so there is equity there. There is an inherent familiarity, India’s size, it was imperative that people aspiring to buy vehicles had access to credit. For there is trust.” banks and financial institutions to provide credit, they needed to be able to see this as a profitable business, which was only possible by reducing the distribution fee to 2 per cent. Never losing focus “We don't compromise margins, we don't compromise on delinquency when it comes to Year 2006 onwards, as the economy picked up our strategy,” says Mr Khanna. If the team foresees delinquency, corrective action is taken momentum, the Auto Loans business witnessed a immediately, even if it means going slow in certain markets or products, or exercising surge in volumes too, even as the distribution fee greater caution in selecting customers. of 2 per cent became the norm. Before long, the business started growing at 18-20 per cent from the “Right now, tractor loans are being reimagined, we're trying to change the way we operate 5-6 per cent (when the distribution fee was higher). the business,” shares Mr Khanna. And it became clear that this is a game of volumes and not margins (read, distribution fee). “Since 2006 An integral link in the value chain till date, we're still at two per cent, it has not even The strategy so far has been to get involved not just when a person needs a loan. It is to offer services that include used car loans, auto insurance, service payments, and be of year, which will be also done digitally. “Today we are taking payments either through any other financial assistance a customer or potential customer might require. “Our focus PayZapp or the account or credit card. We will fund the insurance renewal now through a is on customer retention and having a customer lifecycle management process,” says Mr loan,” adds Mr Khanna. Khanna. Towards this, there are top-up loans for customers who have paid a minimum of 9 EMIs. Almost 65 per cent of business today and, at a larger level, almost 85 per cent of The Bank has also tied up with GPS device vendors, and will fund these devices as what we source in a month, we cross-sell some product or the other. well. “Our positioning to the customer is going to be that we don't just finance the car, we also take care of them after they have bought the car,” says Mr Khanna. “We run huge distribution and pay commission to dealers and DSAs. Almost 60 per cent of our business is open-market oriented and hence commission based, so commission Playing to win has to be competitive.” Almost 16 to 17 per cent of the business is from used cars.