Other income drives HDFC's 2Q profits - Views on News from Equitymaster

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Other income drives HDFC's 2Q profits

Oct 17, 2000

HDFC has reported a year on year 21% increase in the operating income for the 2QFY01. The corporation's profits growth has been fueled by a whopping 495% rise in other income and decline in depreciation charge by 6%. Its operating margins are however declined to 28.2% due to more than proportionate increase in the interest expenses.

(Rs m)2QFY002QFY01Change
Operating Income 4,839 5,862 21.1%
Other Income 6 38 495.2%
Interest Expenditure 3,434 4,211 22.6%
Operating Profit (EBDIT) 1,405 1,651 17.5%
Operating Profit Margin (%)29.0%28.2% 
Other expenses 189 230 21.8%
Depreciation 120 112 -6.3%
Profit before Tax1,1021,34622.1%
Tax 131 182 39.2%
Profit after Tax/(Loss) 971 1,164 19.8%
Net profit margin (%)20.1%19.9% 
Diluted number of shares 119.1 119.1  
Diluted Earnings per share*32.6139.08 

HDFC's approvals during the second quarter grew by 29% to Rs 20 bn and disbursement by 25% to Rs 15 bn( during the first half of FY01 approvals and disbursements grew by 33% and 32% respectively).

The corporation's aggressive focus on retail market by increasing distribution outlets and enhanced tax incentives provided in the last budget has enabled it to maintain a high growth rate. Approvals and disbursements in respect of individual loans were higher by 55% and 52% respectively during the 1HFY01 and retail deposits aggregated to Rs 12.9 bn, an increase of 65% compared to corresponding previous period.

HDFC's recovery performance continues to be good. The gross non-performing loans of the corporation aggregated 1.2% of the total housing portfolio. Since all non-performing assets are fully provided for, the net non-performing assets are nil.

At the current market price of Rs 460, HDFC gets a P/E multiple of 12 times its 2QFY01 annualised earnings. The corporation's strategy of growing inorganically alongwith focus on retail market is expected to maintain its outstanding performance for FY01. However interest spreads are expected to decline with increasing competition from banks and financial institutions.

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