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HDFC shares will be in focus this week after the company's June 2022 quarterly earnings. HDFC posted double-digit growth in its bottom line, while asset quality improved significantly. The company also recorded the highest percentage growth in individual loans on an AUM basis in the past eight years. Also, the company witnessed the highest ever disbursements in the first quarter of a fiscal so far. However, interest rate hike actions post repo rate hike impacted borrowing costs at a certain level. Its overall lending book was stable, while assets under management increased substantially.

In Q1FY23, the NBFC giant reported a consolidated net profit of 3,669 crore against 3,001 crore in the same quarter of the previous year, representing a growth of 22%. As of June 30, 2022, the company's assets under management stood at 6,71,364 crore as against 5,74,136 crore in the previous year.

During the quarter, HDFC's individual loan disbursements grew by 66% over the corresponding quarter of the previous year. Disbursements during the quarter marked the highest ever disbursements for the Corporation in the first quarter of any financial year so far. Also, 92% of new loan applications were received through digital channels. The average size of individual loans stood at 35.7 lakh in Q1FY23 compared to 33.1 lakh in FY22.

As of June 30, 2022, HDFC's individual loans comprise 79% of the AUM. On an AUM basis, the growth in the individual loan book was 19%. This marks the highest percentage growth in the individual loan AUM in 8 years.

"The demand for home loans and the pipeline of loan applications continues to remain strong. Growth in home loans was seen in both, the middle-income segment as well as in high-end properties," HDFC said.

HDFC has proposed to raise an international social loan of $ 1.1 billion – this is the first international social loan from India and among the largest globally.

The company has also entered into a share purchase agreement with SBI for the acquisition of 97,500 equity shares of HVCL representing 19.50% of its paid-up share equity capital, at a consideration of 10 per share.

Should you invest in HDFC shares post Q1FY23?

Research Analysts, Kunal Shah, Renish Bhuva, and Chintan Shah at ICICI Securities in their report said, post repo rate hike, HDFC has raised rates on its deposits as well as lending rates. However, in Q1FY23, interest rate actions had an immediate impact on borrowing costs, without a simultaneous transmission on the asset side, which resulted in a 10bps QoQ decline in margins, and NII growth too slowed to 8% YoY (down 3% QoQ). Adjusted for transmission and higher base in Q1FY22, NII growth would have been 16%, in line with AUM growth.

Further, the analysts explained that HDFC has increased its benchmark lending rates by 90bps, in line with a repo rate hike, and has incrementally shifted from a quarterly reset for individual loans to a monthly reset for new housing loans originated, which will improve transmission. NII growth resultantly is likely to normalise in the coming quarters. Also, the company is holding G-secs of 360 billion and the average liquidity was 400 billion translating into an average LCR at 71%. Overall, management expects NIMs to sustain near ~3.5%.

Nonetheless, the analysts said, "with quarterly reset of back-book loans and monthly reset of incremental loans, we expect NIM as well as NII growth to retrace. Moreoso, growth in individual portfolio improved to 19% (17%/16%/16%/13.6% in Q4 /Q3 /Q2/Q1FY22) and overall AUM growth sustained 16% YoY. With overall improvement in asset quality metrics (stages-2&3 across individual and corporate books), credit cost was contained at 33bps (better than expectations). Maintain BUY with a SOTP target price of Rs3,205 (assigning 3x multiple to core mortgage book)."

On BSE, HDFC shares stood at 2,379.10 apiece up by 43.10 or 1.85%. The company's market valuation is around 4,31,679.65 crore.

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