Last updated: 04 Aug, 2021 | 10:21 am
Net profit declines: HDFC has reported a 1.6% year-on-year decline in standalone net profit at Rs 3,001 crore for April-June quarter compared to Rs 3,051.5 crore in the year-ago period. The decline was due to lower other income and higher tax and employee expenses. Analysts estimated a yearly rise between 7-9. Sequentially, the profit declined 5.6% from Rs 3,179.83 crore. However,on a consolidated basis, profit increased by 31% to Rs 5,311 crore from Rs 4,059 crore in the previous year.
Net interest income rises: A NBFC’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. This is an extremely important number to truly find out as to how much the company is earning from its core operations. HDFC's net interest income (NII) increased by 22.2% to Rs 4,147 crore for the Apr-Jun quarter compared with Rs 3,392 crore the previous year. Inclusive of income from assigned loans, the NII for the quarter ended June rose 23% at Rs 4,414 crore compared to Rs 3,576 crore in the previous year. Net interest margin was at 3.7%.
HDFC Q1 results: Important highlights
Strong loan growth: HDFC’s assets under management (AUM) at the end of the June quarter, stood at Rs 5.74 lakh crore compared to Rs 5.31 lakh crore in the previous year. Individual loans comprise 78% of the total AUM. On an AUM basis, the growth in the individual loan book was 14% and growth in the total loan book was 8%. 33% of home loans approved in volume terms and 14% in value terms were given to customers from the Economically Weaker Section (EWS) and Low Income Groups (LIG). Individual loan disbursements grew 181% on a yearly basis.July 2021 disbursements were the highest ever in a non-quarter end month.Capital Adequacy was at 22.0% and Tier 1 Capital at 21.3% for the quarter ended June.
Asset quality: The Gross NPAs for the quarter ended June stood at Rs 11,120 crore, equivalent to 2.24% of the loan portfolio against 1.98% in the previous quarter.Accounts with unpaid dues outstanding for more than 90 days, rose 27.6% year-on-year to Rs 13,020 crore. This included individual loans worth Rs 5,841 crore and corporate loans worth Rs 7,179 crore. The company held expected credit loss provisions worth Rs 6,290 crore against these assets.
Individual NPAs increased due to slippages on account of the impact of the second wave of the pandemic. Collection efforts were hindered due to the recovery teams being unable to do field visits during the lockdown period. Further, various court orders temporarily curbing recovery efforts of financial institutions, including refraining possession activities under SARFAESI hampered the collection efforts.
As per law it is required to provide provisions worth Rs 5,778 crore. Of this, Rs 2,443 crore is towards provisioning for standard assets and Rs 3,335 crore is towards non-performing assets. The provisions as at June 30, 2021 stood at Rs 13,189 crore.The provisions carried as a percentage of the Exposure at Default (EAD) is equivalent to 2.64%.Meanwhile, the collection efficiency for individual loans on a cumulative basis in June 2021 stood at 98.3 per cent compared to 98 per cent in March 2021.
HDFC Ltd. Q1 results Review:
HDFC, the country's largest mortgage lender, has reported a mixed set of numbers for the quarter ended June. While the NBFC has reported a healthy rise in NII, it has missed estimates on the bottomline due to lower other income and higher tax and employee expenses.The asset quality has also worsened in the quarter. However,growth in home loans was seen in both the affordable housing segment and high end properties. The demand for home loans continues to remain strong and disbursements have picked up with the unlocking of respective locations. HDFC is seeing an improvement in this segment of its loan portfolio, especially after the Union Budget extended the timeline for taking home loans for affordable homes and claiming additional tax deduction on interest payment till March 31st 2022. Going forward, the company is well-positioned to take advantage of the demand recovery given its leadership status. HDFC has made provisions worth Rs 686 crore during the quarter including Covid-19 provisions, taking the cumulative Covid related buffer to Rs 1017 crore.
Brokerage firms are quite optimistic about the stock due to stable Net interest margin and rise in AUM. The asset quality has marginally declined but the company carries enough buffer provisions in its balance sheet. Improvements in the realty cycle and its strong debt market position make them a favoured pick in the sector. Many brokerage firms including CLSA and Morgan Stanley maintained a buy call for the stock. The consensus price target ranged between Rs 3,000 to 3,200. The stock on Wednesday was trading at Rs 2,675, up by 4.75%.