HDFC Ltd net profits up 13 per cent, feels funding cost impact

For the Q3FY23 quarter, HDFC Ltd reported standalone net profits higher by 13% at Rs 3,691 crore. While this appears to be ok on paper, this was lower than the street expectations of profits for the quarter. HFDC Ltd is India’s largest mortgage lending company and has substantial stakes in the banking, mutual fund and insurance business of the HDFC group.

One of the key metrics of a housing finance company, the net interest income (NII), expanded by just about 13% in the Q3FY23 quarter to Rs 4,840 crore as against Rs 4,284 crore in the year ago quarter. This is because, the cost of funds for HDFC got repriced quickly, unlike in the case of banks where the repricing happened with a lag. Asset impairment was lower at Rs 370 crore in Q3FY23.

HDFC reported assets under management (AUM) growth of 13.3% yoy at Rs 701,485 crore, meaning the entire profit growth came from volumes. The comfort level for HDFC stems from the fact that nearly 82% of the AUM comprises of individual loans and this segment of AUM has grown 18% yoy. In the home loan segment, there was robust growth visible in the mid-income segment as well as in the demand for high-end properties.

For the FY23 period so far, the collection efficiency for individual loans stood at 99% which showed why there was a significant improvement in NPLs of HDFC Ltd. In fact, the for the individual portfolio, the NPL (non-performing loans) tapered by 58 basis points from 1.44% to 0.86% on a yoy basis. For non-individual loans, NPL fell from 5.04% to 3.89%. HDFC has also reported very comfortable capital adequacy ratio at 23.7% of which the Tier-I capital (core capital) adequacy stood at 23.2%. The minimum requirement for the capital adequacy ratio and Tier I capital is 15% and 10% respectively.