With his decision to stay focused on low-income home buyers, a profitable segment with a consistent trajectory of growth, Sudhin Choksey has carved a niche for Gruh Finance
In 1998, when Sudhin Choksey took over as the CEO of Gruh Finance, the company was in a financial mess. For Choksey, the reason was not hard to see; correcting it, though, was going to take the better part of the next five years.
Founded in 1986 by the late HT Parekh—who also established the financial conglomerate HDFC—Gruh Finance’s initial mission was to provide housing loans to low-income people in small towns. But in the years preceding Choksey’s elevation, the company had strayed from its initial mandate. In addition to making mortgages available to the lower end of the pyramid, Gruh had ventured into allied areas like providing construction finance to developers.
So it was hardly a surprise that the real estate crash of 1994-96 hit the company hard. Developers stopped making interest payments even as home sales dipped, resulting in no cash flows. It was then that Choksey, 62, who describes himself as a “hands on” manager, got into the act.
Nearly two decades later, the results are for all to see. Gruh Finance, a subsidiary of HDFC, has established a niche for itself in the housing finance sector by providing small-ticket home loans in small towns and cities. It has also developed its own model to assess the credit risk of people without regular incomes.
In the process, the company has grown its revenues and profits at a CAGR of 24 percent and 17 percent respectively, in the last five years. Its stock price has also grown at a compounded annual rate of 47 percent in the same period. These numbers alone vindicate the changes effected by Choksey.
Staying true to fundamentals
One of Choksey’s first steps after assuming charge at Gruh was to refocus on the founding mission of the company—providing home loans to people with small incomes and living in small towns. For this, he realised Gruh had to revamp its branch model.
“I realised that the branch model of HDFC would not work in small towns,” he says. On a visit to a Gruh Finance branch in Mehsana, on the outskirts of Ahmedabad, Choksey noticed there were 11 employees (two each for marketing, legal, collections and so on)—a large number in a branch that had little business. “The branch structure had to be changed and this could only be done by redeploying the staff,” he says.
Across the smaller towns of Gujarat, new branches managed by just two people were opened. With resources more efficiently deployed, Choksey now turned his attention to perfecting his product offering and tailoring it for the bottom of the pyramid.
(This story appears in the 27 May, 2016 issue of Forbes India. To visit our Archives, click here.)