HDFC Q1 profit falls 17%, says exposure to Essar Steel at Rs910 crore
Mumbai: Mortgage lender Housing Development Finance Corp. Ltd (HDFC) on Wednesday reported a 16.84% decline in its June quarter net profit to Rs1,566 crore.
However, the 1,871 crore profit it recorded a year ago was boosted by a one-time gain of Rs697 crore.
Still, the June quarter profit failed to meet Street expectations. According to estimates of 11 Bloomberg analysts, HDFC was expected to post a net profit of Rs1,769.60 crore.
In a statement, HDFC said its results for the quarter are not comparable from a year ago as it sold shares of HDFC ERGO General Insurance Co. to ERGO International AG, an arm of Munich Re for Rs922 crore, and also created a one-time special provision of Rs275 crore as a charge to the statement of profit and loss in the June 2016 quarter.
The leading mortgage lender also clarified that it has an exposure of Rs 910 crore towards Essar Steel Ltd, one of the 12 accounts identified by the Reserve Bank of India for initiating bankruptcy proceedings.
“HDFC has made 25% provisioning against Essar Steel and this is likely to increase if the exposure is not settled,” said Keki Mistry, vice-chairman and chief executive officer, HDFC, on the sidelines of its annual general meeting. “RBI’s 50% additional provisioning norm for accounts referred to NCLT will not apply to us,” he added.
The company said for this quarter, the tax rate was higher at 34% compared to 30.7% in the corresponding quarter of the previous year because the stake sale of HDFC ERGO attracted long-term capital gains tax at a lower rate of 23.07% compared to the marginal tax rate.
“We expect the tax rate to significantly reduce in the subsequent quarter on account of dividend income and sale of investments,” the company said in a release to the stock exchanges.
Provisions for the quarter fell 75% to Rs85 crore against Rs340 crore a year ago. Total income declined 3% to Rs8,141.76 crore.
On a consolidated basis, HDFC reported a net profit of Rs2,733.87 crore, down 2.3% from Rs2,796.92 crore a year ago. Total income rose 6.9% to Rs14,463.01 crore. Provisions fell 67.53% to Rs113.77 crore.
HDFC said its board approved issue of non-convertible debentures worth Rs35,000 crore on a private placement basis.
HDFC shares closed at Rs 1633.25 on the BSE on Wednesday, up 0.95% from their previous close, while the benchmark Sensex index rose 0.48% to close at 32,382.46 points.