HUDCO 2022-23 Annual Report Analysis

Thu, 31 Aug

HUDCO has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during the year 2022-23.

HUDCO Income Statement Analysis

• Interest income during the year rose 1.4% on a year-on-year (YoY) basis.
• Interest expenses were down by 0.6% YoY during the same period.
• Operating expenses declined by 2.4% YoY during the year.
• The company's net interest income (NII) increased by 5.0% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a growth and stood at 3.2% in FY23 as against 3.1% in FY22.
• Other income declined by 62.3% YoY during the year.
• Net profit for the year declined by 0.9% YoY.
• Net profit margins during the year declined to 24.1% in FY23 from 24.7% in FY22.

HUDCO Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	69,541	70,495	1.4%
Other Income	Rs m	2,931	1,104	-62.3%
Interest Expense	Rs m	45,325	45,071	-0.6%
Net Interest Income	Rs m	24,216	25,424	5.0%
Operating Expense	Rs m	3,608	3,521	-2.4%
Pre-provision Operating Profit	Rs m	23,538	23,007	-2.3%
Provisions & Contingencies	Rs m	422	438	3.8%
Profit before tax	Rs m	23,458	22,892	-2.4%
Tax	Rs m	6,293	5,878	-6.6%
Profit after tax	Rs m	17,164	17,014	-0.9%
Minority Interest	Rs m	0	0	0.0%
Net Interest Margin	%	3.1	3.2
Net profit margin	%	24.7	24.1

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HUDCO Balance Sheet Analysis

• The company's deposits during FY23 stood at Rs 1 m as compared to Rs 17 m in FY22, thereby witnessing a decrease of 95.8%.
• Advances for the year stood at Rs 792.0 bn as compared to Rs 769.5 bn during FY22, a rise of 2.9%.
• Cost of deposits for HUDCO rose 560.0% and stood at 400.0%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 6.7 bn during the year from Rs 3.0 bn in FY22.
• Borrowing stood at Rs 138.6 bn, a growth of 202.3% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 813.9 bn as against Rs 793.1 bn during FY22, thereby witnessing a rise of 2.6%.

HUDCO Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	144,668	154,436	6.8%
Advances	Rs m	769,519	792,027	2.9%
Deposits	Rs m	17	1	-95.8%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	60.6	400.0
Investments	Rs m	2,966	6,653	124.3%
Borrowings	Rs m	45,848	138,593	202.3%
Total Assets	Rs m	793,082	813,928	2.6%

Current Valuations for HUDCO

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 8.5, an improvement from the EPS of Rs 8.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 76.6, stands at 5.3 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 1.0 times, while the price to income ratio stands at 1.3 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	34.7	35.2
Earnings per share (Unadj.)	Rs	8.6	8.5
Diluted earnings per share	Rs	8.6	8.5
Avg P/E ratio	Rs	5.2	5.3
Avg P/ABV ratio	Rs	0.6	1.0
Avg Market Cap	Rs	88,934	89,835
Dividends per share (Unadj.)	Rs	3.50	3.85

Ratio Analysis for HUDCO

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio improved and stood at 113,146,700.0x during FY23, from 4,663,749.7x during FY22. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio increased and stood at 0.90x during FY23, from 0.32x during FY22. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): HUDCO's capital adequacy ratio (CAR) was at 73.8% as on 31 March 2023 as compared to 64.8% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company deteriorated and stood at 11.0% during FY23, from 11.9% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company deteriorated and stood at 2.09% during FY23, from 2.16% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company deteriorated and stood at 8.81% during FY23, from 9.16% during FY22. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. HUDCO's gross NPA ratio stood at 3.4% as of 31 March 2023 compared to 3.6% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of HUDCO was 0.5% in financial year 2023. This compared with 0.5% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	4,663,749.7	113,146,700.0
Debt to Equity Ratio	x	0.3	0.9
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	64.8	73.8
Return on Equity	%	11.9	11.0
Return on Assets	%	2.2	2.1
Return on Capital Employed	%	9.2	8.8
% of Gross NPAs	%	3.6	3.4
% of Net NPAs	%	0.5	0.5
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how HUDCO has performed over the last 5 years, please visit here.

HUDCO Share Price Performance

Over the last one year, HUDCO share price has moved up from Rs 40.6 to Rs 76.6, registering a gain of Rs 36.1 or around 88.9%.

Overall, the S&P BSE SENSEX is up 12.3% over the year.

(To know more, you can check out historical annual results for HUDCO here and quarterly results for HUDCO here)