HDFC net profit rises 27% led by stake sale in insurance arm


Mumbai: Housing Development Finance Corp. Ltd (HDFC) said fiscal first-quarter profit rose 27% led by one-time gains from the sale of its investments.

The net profit of India’s largest mortgage lender rose to Rs.2,797 crore for the quarter ended 30 June from Rs.2,204 crore a year ago. On a stand-alone basis, net profit grew 38% to Rs.1,871 crore from Rs.1,360.90 crore in the corresponding quarter a year ago.

According to a Bloomberg survey of 15 analysts, the mortgage lender was expected to post a stand-alone net profit of Rs.1,875.30 crore for the quarter ended June.

HDFC generated Rs.867.52 crore profit from the sale of investments during the quarter, out of which Rs.725 crore was from the sale of its 22.9% stake in unlisted general insurance arm HDFC ERGO to partner ERGO International AG.

This is the second straight quarter wherein a one-time gain has driven up HDFC’s profits. In the previous quarter, it made a one-time profit of Rs.1,422 crore from the sale of its shares in its subsidiary, HDFC Standard Life Mauritius Holdings 2006 Ltd.

Unrealized gains from the company’s listed subsidiaries stood at Rs.64,375 crore, Keki Mistry, vice-chairman and chief executive officer at HDFC, said. He added that the proposed merger of subsidiary HDFC Standard Life Co. with Max Life Insurance Co. will be finalized by August. In June, HDFC Standard Life, Max Life Insurance and Max Financial Services Ltd resolved to enter into an agreement to evaluate a merger of the two Max Group entities with the former.

Profits of the company’s subsidiaries contributed 33% to the consolidated profit. The company’s revenue in the quarter rose 15% to Rs.17,012 crore from Rs.14,726.18 crore a year ago.

As of 30 June 2016, HDFC’s loan book grew 17% to Rs.2,65,731 crore from Rs.2,31,224 crore the previous year. Loans to individuals made up more than 70% of its overall portfolio. In terms of growth, about 88% came from individual loans. Apart from the individual loan book, the company’s developer loan segment also helped improve overall growth in advances. In June, HDFC added Rs.1,192 crore worth of loans in its non-retail loan book.

“Growth is largely coming from tier-2 and tier-3 towns, and outskirts of these cities,” said Mistry.

The faster growth in individual loans put pressure on margins as these loans are given at a lower spread compared with loans to developers.

In the April-June period, the mortgage lender’s interest-rate spread contracted marginally to 2.26% from 2.29% in the preceding quarter. The spread on the individual loan book was 1.91% and on the non-individual book it was 3.06%.

However, net interest margin for the lender remained steady at 3.8% and Mistry said that shift towards borrowings through bonds and away from bank loans helped maintain margins.

The lender is targeting to raise Rs.35,000 crore through private placement of bonds and received board approval for the same on Wednesday, it said.

Faster loan disbursements also resulted in a rise in payment of commissions to agents, Mistry said, adding that this resulted in a lower growth in net interest income for the lender.

The company’s net interest income grew by a modest 7.8% to Rs.2,283.05 crore for the quarter ended 30 June.

HDFC was able to maintain its asset quality with gross non-performing loans as of June end amounting to Rs.2,006 crore, or 0.75% of its loan portfolio. The non-performing loan ratio in the individual portfolio was 0.59%; the ratio in the non-individual portfolio was 1.11%.