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HDFC: Stake sale in subsidiary boosts profits - Views on News from Equitymaster
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HDFC: Stake sale in subsidiary boosts profits
May 4, 2016

HDFC declared its results for the fourth quarter (4QFY16). The institution has reported 6.9% YoY growth in net interest income while net profits have grown by a modest 53.9% YoY during 4QFY16. Here is our analysis of the results.

Performance summary
  • On the back of a 13.6% growth in loan book, HDFC posted a 6.9% growth in net interest income in 4QFY16. For FY16, the net interest income was up by 8.5%.
  • The net interest margin reduced slightly to 3.9% for the quarter.
  • The other income surged by over 500% for 4QFY16 on account of stake sale in the life insurance subsidiary. For FY16, other income was up by 233%.
  • Provisions were up 11 folds and 4 folds for 4QFY16 and FY16, respectively.
  • Net profit witnessed a jump of 40% YoY in 4Q FY16 backed by proceeds from stake sale in insurance subsidiary. For FY16, the net profits grew by 18.4% YoY.
  • Capital adequacy and gross NPAs stand at 16.6% and 0.7% respectively at the end of March 2016.
  • The company declared a final dividend of Rs 14 per share and along with the interim dividend, the total dividend works out to Rs 17 per share. At the current price, the dividend yield works out to 1.6%

    Standalone financial performance snapshot
    (Rs m) 4QFY15 4QFY16 Change FY15 FY16 Change
    Interest Income 72,229 76,907 6.5% 269,599 292,573 8.5%
    Interest Expense 45,829 48,699 6.3% 179,751 193,745 7.8%
    Net Interest Income 26,400 28,208 6.9% 89,848 98,828 10.0%
    Net interest margins 4.00% 3.90%
    Other Income 2,335 15,351 557.3% 5,110 16,993 232.5%
    Other Expense 1,701 1,688 -0.7% 7,066 7,590 7.4%
    Provisions and contingencies 500 5,450 990.0% 1,650 7,150 333.3%
    Profit before tax 26,534 36,421 37.3% 86,241 101,081 17.2%
    Tax 7,910 10,350 30.8% 26,340 30,150 14.5%
    Effective tax rate 29.8% 28.4% 30.5% 29.8%
    Profit after tax/ (loss) 18,624 26,071 40.0% 59,901 70,931 18.4%
    Net profit margin (%) 25.8% 33.9% 22.2% 24.2%
    No. of shares (m) 1579.9
    Book value per share (Rs)* 216.0
    P/BV (x) 5.2

    * (Standalone book value as on 31st March 2016)

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