Signage for HDFC displayed in Mumbai (Photographer: Adeel Halim/Bloomberg) 

Q1 Results: HDFC Profit Meets Estimates, To Raise $1.5 Billion Via ECBs

Housing Development Finance Corporation Ltd.’s profit met estimates in the quarter ended June.

Net profit of the mortgage lender jumped 53.7 percent on a yearly basis to Rs 2,190 crore in the first quarter, the lender said in its exchange filing. That compares with the Rs 2,167 crore estimated by analysts tracked by Bloomberg.

Growth in profit was aided by a dividend income of Rs 511 crore from HDFC Bank in the reporting quarter. Revenue from operations rose 19.7 percent year-on-year to Rs 9,883.6 crore. The net interest margin stood at 3.5 percent.

“Though net interest margin has declined sequentially, the spread has been maintained within the guided range,” Ashutosh Mishra, senior research analyst at Reliance Securities, said.

The mortgage lender switched to new accounting standards from April 2018.

Gross non-performing loan ratio stood at 1.18 percent of the total advances, compared with 1.11 percent in the quarter ended March. Net bad loan ratio in the individual loan portfolio was 0.66 percent and 2.32 percent for the non-industrial portfolio.

Provisions against bad loans fell to Rs 19.7 crore from Rs 163.3 crore in the previous quarter which had included a one-time provision for the contingencies account.

Other Highlights

  • Net interest income for the quarter rose 20 percent year-on-year to Rs 2,412 crore.
  • Capital adequacy ratio stood at 16.3 percent.
  • Individual loan book grew 19 percent.
  • The non-individual loan book grew 18 percent.
  • Individual loans comprise 72 percent of its total assets.

The company’s board approved raising $1.5 billion (about Rs 10,200 crore) in external commercial borrowings and to issue debentures worth up to Rs 35,000 crore.

The stock fluctuated between gains and losses to trade a little changed at Rs 2,048 apiece as of 2:25 p.m. HDFC has risen 20.1 percent this year so far compared with a 10.7 percent gain in the S&P BSE Sensex.

Here’s what brokerages had to say about HDFC’s June quarter performance:

JP Morgan

  • Maintained ‘Overweight’ with a price target of Rs 2,300.
  • Stable performance with 18 percent loan growth.
  • Spreads and asset quality remain well controlled.
  • Best play to capture property upcycle which could start in 2018.

Credit Suisse

  • Maintained ‘Outperform’; raised price target to Rs 2,350 from Rs 2,250.
  • NII growth was robust led by strong AUM growth.
  • Asset quality remained stable; Credit costs dropped on transition to IND-AS.
  • Stock trading at attractive valuations given loan growth and sustained profitability.