HDFC quarterly profit up near 40% on stake sale in two subsidiaries, lower tax costs

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HDFC or the Housing Development Finance Corporation reported a 39 percent jump in net profit to Rs 2,846 crore for the fourth quarter ending March 2018, exceeding expectations despite an increase in the provisions.

The profit grew on the back of lower tax costs and stake sale in two of its subsidiaries. Profit stood at Rs 2,044 crore in the year-ago period.

A Reuters poll had estimated profit to rise by 20.5 percent to Rs 2,464 crore.

The Keki Mistry-led mortgage lender's tax cost declined 25 percent year-on-year to Rs 671 crore (including tax write-back of Rs 85 crore) for the quarter.

Profit on the sale of investments was Rs 294.31 crore for the quarter following entire stake sale in subsidiaries HDFC Realty and HDFC Developers to Quikr India. Profit on sale of investments during the year-ago period was at Rs 48.62 crore.

After adjusting for the exceptional items and one-time transactions (i.e. profit on sale of subsidiaries and consequent special additional provisions), the profit before tax would have been Rs 11,397 crore for the year ended March 31, 2018 compared to Rs 10,082 crore in the previous year, representing a growth of 13 percent, HDFC said.

NII or net interest income (the difference between interest earned and expended) met expectations to grow 4 percent to Rs 3,249 crore.

NII was projected to grow to Rs 3,232 crore, as per Reuters poll.

Last year in the same period, NII stood at Rs 2,852 crore, including the one-time gain of stake sale in its life insurance subsidiary.

Provisions and contingencies in March quarter shot up 21.6 percent year-on-year and 89.5 percent sequentially to Rs 180 crore due to additional provisions.

"The Corporation has made an additional provision of Rs 80 crore to shore up the provision & contingencies account and thereby recognise provisions towards specific loans against future risks," HDFC said in its filing.

Loan growth
Total loan book stood at Rs 359,442 crore, up by 21 percent over last year.

Of these, total individual loan disbursements grew by 29 percent and the average size of individual loans stood at Rs 26.4 lakh.

The non-individual loan book grew at 17 percent.

The individual loans grew to 73 percent of the total loans, up from 72 percent a year ago.

Of the individual loans, 38 percent of home loans approved in volume terms and 19 percent in value terms have been to customers from the Economically Weaker Section (EWS) and Low Income Group (LIG).

Gross NPAs
Gross non-performing assets (NPAs) as at March 31, 2018 stood at Rs 4,019 crore, which is 1.11 percent of its loan portfolio.

The NPAs of the individual portfolio increased marginally to 0.64 percent from 0.61 percent last year while that of the non-individual portfolio worsened to 2.18 percent from 1.16 percent a year back.

Full year results
The reported profit before tax for the year ended March 31, 2018 stood at Rs 15,264 crore compared to Rs 10,727 crore in the previous year – an increase of 42 percent.

HDFC earned a profit of  Rs 5,257 crore from the initial public offer of HDFC Standard Life Insurance Company Limited (HDFC Life) and had created an additional special provision of Rs 1,575 crore as a charge to the statement of profit and loss, both were exceptional items.

Dividend and Mistry's reappointment
The Board of directors announced a dividend of Rs 16.50 per share. Including the interim dividend of Rs 3.50 per share, the total dividend for the year is Rs 20 as against Rs 18 per equity share for the previous year.

The Board of directors also recommended reappointment of Keki Mistry as the Vice-Chairman and CEO of HDFC  for a period of three years.

Despite increasing competition in the home loan market with rivals State Bank of India (SBI), ICICI Bank and Axis Bank, HDFC has managed to maintain its market share.

The Keki Mistry-led home financier has grabbed market share by being consistent in keeping interest rates among the lowest in the industry. It has also maintained a healthy asset quality over the past several quarters.

The article first appeared here