BackHDFC profit rises 6.6% to Rs1,520 crore
Lender cites growth in non-individual book in the December quarter as a pointer to green shoots in the economy
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Mumbai: Housing Development Finance Corporation (HDFC) Ltd, India’s largest and oldest mortgage lender, said on Wednesday that net profit rose 6.6% in the quarter to 31 December on higher income from operations.
HDFC’s net profit rose to ₹ 1,520.51 crore in the three months, from ₹ 1,425.49 crore a year ago. The housing financier’s income from operations rose 7.4% to ₹ 7,259 crore from ₹ 6,758.36 crore a year ago.
The lender also reported an increase in its non-individual loan book during the quarter, boosted by segments including construction financing and lease and rent financing.
“As compared with negative growth in the first six months of this financial year, we’ve seen ₹ 1,987 crore worth of incremental credit growth in the non-individual loan book during the December quarter," said Keki Mistry, vice-chairman and managing director, in a phone interview.
HDFC is in the business of lending to individual retail home loan borrowers and builders.
Its loan book as of 31 December stood at ₹ 2.48 trillion, up 13% from ₹ 2.2 trillion a year ago. Of the total loan book, individual loans comprise 73%, HDFC said in a statement.
According to Mistry, the growth in the non-individual book points to green shoots in the economy, as investments have started flowing in during the quarter.
Analysts believe that HDFC’s traditionally cautious approach towards growing its non-individual loan book may now be reversing.
“The growth in the non-individual loan book would definitely be looked at as a confidence booster. But we should wait for at least two or three quarters to see if the growth is sustainable and whether it is really a trend or a blip because of a few customers making some investments," said Ravi Shenoy, assistant vice president-midcaps research, Motilal Oswal Securities Ltd.
On a quarter-on-quarter basis, HDFC’s net profit dropped from ₹ 1,604.56 crore in the July-September period. The profit in the second quarter was higher because of a ₹ 314.57 crore dividend it received from HDFC Bank Ltd.
“The lower profit growth was due to a combination of a number of factors including lower interest income due to falling interest rates in the economy, lower profit from sale of investments as compared with a year ago, a one-off income due to sale of property last year and higher standard asset provisions this year," said Mistry.
HDFC’s capital adequacy, a measure of financial strength expressed as a ratio of capital to risk-weighted assets, stood at 17.7%.
Gross non-performing loans as of 31 December amounted to ₹ 1,794 crore, or 0.72% of the loan portfolio. The non-performing loans of the “individual" portfolio amounted to 0.54% while those in the “non-individual" portfolio were 1.12%, the statement said.
“As per the National Housing Bank norms, the Corporation is required to carry a total provision of ₹ 1,865 crore," the housing finance company said.
On a consolidated basis, HDFC’s profit after tax rose to ₹ 2,419 crore in the third quarter from ₹ 2,179 crore a year ago.
HDFC has four major subsidiaries—HDFC Bank, HDFC Standard Life Co. Ltd, HDFC Ergo General Insurance Co. Ltd and HDFC Asset Management Co. Ltd.
Talking about the so-called masala bond issue by HDFC to raise $750 million, Mistry said that the housing financier had not started any discussions yet.
“Given the global conditions, we don’t know what kind of response we would get on the issue if we were to go to the international investors now," he said.
Masala bonds allow companies to tap the overseas bond markets to raise funds but take away the currency risk associated with overseas fund raising since the bonds are issued in rupees. The currency risk in such an issue is borne by the investors who build it into the pricing of the issue. HDFC’s board had approved the fund raising in October.
HDFC shares fell 0.55% to ₹ 1,167.70 at the close of trading on a day the BSE’s benchmark Sensex ended barely changed at 24,492.39 points.
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