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HDFC: Growing steadily - Views on News from Equitymaster
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  • Jul 17, 2001

    HDFC: Growing steadily

    HDFC has reported 15% growth in topline for the 1QFY02, in line with our expectations. The company's net profits too witnessed a sharp rise of 25%.

    (Rs m) 1QFY01 1QFY02 Change
    Income from Operations 5,522 6,331 14.6%
    Other Income 5 9 100.0%
    Interest Expenditure 4,117 4,624 12.3%
    Operating Profit (EBDIT) 1,405 1,707 21.5%
    Operating Profit Margin (%) 25.4% 27.0%  
    Other Expenses 251 295 17.5%
    Depreciation 108 90 -16.3%
    Profit before Tax 1,052 1,332 26.6%
    Tax 141 191 35.7%
    Profit after Tax/(Loss) 911 1,141 25.2%
    Net profit margin (%) 16.5% 18.0%  
    No. of Shares (eoy) (m) 119.1 119.1  
    Diluted Earnings per share* 30.6 38.3  
    P/E (at current price)   17  

    A rise of over 150 basis points in operating margins fueled the bottomline growth of HDFC. The cost to income ratio of the company also declined by 60 basis points to 17.2%. However, increase in effective tax rate to 14.3% from 13.4% in 1QFY01 trimmed the net profit growth of the company.

    During the quarter, HDFC's approvals grew by 32% to Rs 15.9 bn and disbursements witnessed an outstanding growth of 31% to Rs 12.2 bn. Approvals and disbursements in respect of individual loans were higher by 39% and 41% respectively, as compared to the corresponding period in the previous year. Higher incentives provided by the budget and slide in real estate prices boosted the individual loan disbursements. Advances to individuals account for about 70% of HDFC's total loan portfolio.

    HDFC's total deposit base increased by 26% YoY to Rs 78 bn despite strong competition from banks and mutual funds. Also the ban on deferral products (badla and ALBM) partly contributed in fueling the deposit growth.

    During the previous year, the company changed its accounting policy for brokerage expense, to bring it in conformity with International Accounting Standards. As per the new policy, the total brokerage payable, other than incentive brokerage, is amortised over the period of the deposit. The expense on account of brokerage for 1QFY01 has been re-computed, which has resulted in a reduction of Rs 59 m from the amount of brokerage. After adjusting Rs 13.7 m towards tax, the net profit for 1QFY01 is consequently higher by Rs 45.5 m. This in turn will translate into profit growth of 19.3% compared to 25% before adjustment.

    At the current market price of Rs 660, HDFC is trading at a P/E multiple of 14x and Price/Book value ratio of 2.9x FY02 projected earnings.



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