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

Q2 Results: HDFC’s Profit Rises Aided By HDFC AMC IPO Proceeds

Housing Development Finance Corporation Ltd.’s profit for the quarter ended September rose as analysts expected.

Net profit rose 24 percent on a yearly basis to Rs 2,467 crore in the three months ended September, India’s largest mortgage lender said in an exchange filing. That compares with the consensus estimate of Rs 2,357 crore by analysts tracked by Bloomberg.

The profit was aided by income from sale of investments, including Rs 891 crore from shares sold during HDFC Asset Management Company Ltd.’s initial public offering. That was partially offset by a 99 percent decline in dividend income, which fell to Rs 5.77 crore.

“If you remove the dividend from last year’s figure and the profit from sale of investments, then the adjusted profit has grown by 25 percent,” said Vice Chairman and Chief Executive Officer Keki Mistry. The dividend from HDFC Bank, which generally came in the second quarter till last year, came during the April-June period this time. “So when you’re comparing with the previous year, you need to remove the dividend from last year’s figure,” Mistry said.

Revenue from operations rose 25 percent to Rs 11,245.6 crore. The company adopted new accounting standards from April, which mandated the firm to account for income from loans sold. That led to a 22 percent rise in net interest income at Rs 2,991 crore for the July-September period. Under the older accounting standard, there would have been a 16 percent increase at Rs 2,594 crore.

The firm’s provisioning for impaired financial instruments jumped to Rs 401 crore, against a write-back of Rs 61.63 crore in the year-ago period. That, according to Mistry, is due to a 30 percent provisioning of profits received from the sale of shares of HDFC AMC, along with a 38 percent provisioning towards a Rs 390-crore loan given to the IL&FS Group.

We have given a loan to IL&FS where the repayment of the loan comes directly out of the rentals payable by tenants. So it isn’t really an exposure to IL&FS in that sense, but it comes out of the rentals. On the basis of conservative accounting, we are carrying a fairly large provisioning for that
Keki Mistry, CEO, HDFC

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Other highlights:

  • Net interest margin stood at 3.5 percent.
  • Asset quality improved as bad loans as a percentage of total assets fell.
  • Gross non-performing assets ratio stood at 1.13 percent against 1.18 percent reported in the June quarter.
  • The non-performing loans of the individual portfolio stood at 0.66 percent while that of the non-individual portfolio stood at 2.18 percent.
  • Capital adequacy ratio stood at 18.4 percent.
  • The total loan book grew 17 percent to Rs 3,79,091 crore.
  • Individual loan book grew 18 percent.
  • The non-individual loan book grew 13 percent.
  • Individual loans comprise 73 percent of its total assets under management.

Shares of the company rose 1.5 percent to Rs 1,795.75 apiece after the earnings announcement.