HDFC: Q2FY14 Result

The country's largest housing finance company, HDFC announced its second quarter results today. The company registered 10% growth in its standalone net profit as per market expectations. The stock was trading in negative zone before result announcement, however, the stock turned slowly into positive territory after the results were announced.

The company's income from operations stood at Rs 5859.19 crore in Q2FY14, with a growth of 13.21% over same period last year. Net Interest Income increased by almost 11% to Rs 1813.54 crore in Q2FY14 against Rs 1633.94 crore in Q2FY13. Interestingly, the company's Provisions for Contingencies decreased by 62.50% on yearly basis and 50% on sequential basis to Rs 15 crore in Q2FY14.

Dividend and profit on sale of investments during Q2FY14 came in lower at Rs 257.25 crore as compared to Rs 288.58 crore in the corresponding quarter of the previous year. The profit after tax for this quarter stood at Rs 1266.33 crore as compared to Rs 1151.12 crore for the corresponding period of the previous year, representing a growth of 10%.

Net Interest Margin for H1FY14 stood at 4.1% and the spread on loans over the cost of borrowings for first half stood at 2.24%. However, the gross NPAs for HDFC during this quarter was slightly higher at 0.79% of the loan portfolio against 0.77% previous year.

As of September 30, 2013 the total assets of the company stood at Rs 212071 crore as against Rs 180637 crore as at September 30, 2012, reporting an increase of 17%. As of September 30, 2013, the loan book stood at Rs 184886 crore as against Rs 155128 crore as at September 30, 2012. The growth in the total loan book inclusive of loans sold is 22% (19% net of loans sold). As at September 30, 2013, the unrealised gains on HDFC’s listed investments amounted to Rs 28938 crores excluding the appreciation in the value of unlisted investments.

Overall HDFC reported earnings performance for the quarter in-line with market expectations. Healthy loan book growth, good growth in NII lower provisioning expenses are some of the positives for this housing finance company. Given the challenging macro environment, we expect to HDFC will be market performer in future.