The Mumbai-based Wadhawan family, which owns two BSE-listed companies – home financier, Dewan Housing Finance Corporation (DHFL) and property developer, Housing Development and Infrastructure (HDIL), is working out a share-swap arrangement between family members, as part of a succession plan.
Kapil Wadhawan, chairman and managing director of DHFL and his brother, Dheeraj Wadhawan, who is a non-resident Indian, will sell their shares in HDIL in favour of their uncle Rakesh Kumar Wadhawan, and cousin, Sarang Wadhawan.
Kapil and his brother together hold around 7 per cent stake in HDIL, which is 60.7 per cent held by the promoter family.
In turn, Rakesh and his son Sarang will sell their 14 per cent stake in DHFL to Kapil and Dheeraj. The promoter family holds 48 per cent in DHFL.
On July 28, Rakesh resigned from DHFL board as chairman, paving the way for Kapil to take charge of the housing finance company as chairman. Sarang, a non-executive director, has also stepped down from the DHFL board. Kapil and Dheeraj have, in turn, stepped down from the board of HDIL.
“We have removed the cross directorship from the group companies, and it will be soon followed by moving away from being promoters. We are working on a share swap arrangement, which will be implemented very soon,” Kapil Wadhawan told Financial Chronicle.
He said his brother Dheeraj and himself would focus on housing finance and retail sectors, while his uncle and cousin take the reins of the real estate business, under HDIL, which has also ventured into other sectors like entertainment, broadcasting and multiplexes.
Kapil will continue to oversee Wadhawan Holdings, which runs food and grocery retail and hospitality ventures. His brother, who has real estate interests in the UAE and Australia, will continue with his businesses. “This has been a very amicable succession planning. The family remains united, and under one roof,” he said.
As on July 30, the market capitalisation of DHFL stood at Rs 1,045 crore while it was Rs 9,595 crore for HDIL. Kapil, the new chairman of DHFL, which has a housing finance portfolio of around Rs 6,700 crore, has set a target of Rs 25,000 crore to be achieved by 2013. “We have three years and 8 months to go. The company has grown at an average compounded annual growth rate of 33 per cent over last seven years, and we are confident that we would achieve the target,” Kapil Wadhawan said.
The company, which is focusing on tier-II and tier-III cities in Andhra Pradesh, Maharashtra, Tamil Nadu and Kerala, with the help of 180 franchisees and branch offices, will continue to concentrate on low, middle income groups as its customer base. The average loan size is Rs 4.4 lakh. Its interest rates are hovering in the 9-11 per cent range. “We are dropping our rates by 50-75 basis points beginning August 1,” he said.
His company has a fresh fund-raising programme of Rs 1,000 crore through non-convertible debenture issues. National Housing Bank, which provided Rs 800 crore refinancing loan in 2008-09, is likely to extend over Rs 1,000 crore facility during the current financial year.
“We recently raised Rs 300 crore through a qualified institutional placement, with domestic and foreign investors chipping in with Rs 225 crore,” he said, adding that the rest came from the promoters.
DHFL’s total borrowing is around Rs 6,250 crore, with banking sector accounting for 72 per cent. “We are getting loans at sub-9 per cent from banks,” he said.
For Kapil, the retail business is still in the evolutionary stage. “I believe that perseverance will pay off. India will soon open FDI into the sector,” he said. Under Wadhawan Retail Pvt Ltd, which is the retailing arm of Wadhawan Holdings, `Spinach’, `Sabka Bazaar’ and `Smart’ are the popular, food and grocery formats. Because of the economic downturn, some of his 200-odd stores across the country have been shut down.