HDFC Ltd net profit surges 22% YoY to Rs 3,668 crore in June quarter

It looks to raise $1.1 billion in external commercial borrowing

Mortgage financier HDFC Ltd’s net profit grew 22 per cent year-on-year (YoY) to Rs 3,668 crore in the April-June quarter (Q1) of FY23, aided by dividend income and lower impairment losses on financial instruments. But it missed Street estimates as Bloomberg analysts had predicted its net profit at Rs 3,883.5 crore.

Shares of the lender closed at Rs 2,379.10 apiece, up 1.85 per cent from the previous day’s close.

HDFC Ltd reported net interest income to the tune of Rs 4,446.90 crore, up 8 per cent YoY. Lower NII growth was due to transmission lag; it would unwind in the coming quarters, its management said. 

The net interest margin of the lender stood at 3.4 per cent in Q1FY23, as against 3.7 per cent in Q1FY22 and 3.5 per cent in Q4FY22. The drop in the margin was largely due to the interest rate actions by the central bank having an impact on the borrowing cost of the lender without a simultaneous transmission on the asset side.

Other income was up 29 per cent YoY and 10 per cent sequentially to Rs 1,285 crore, led by income earned on the assignment of loans and fees and commission income.

“The corporation has increased its benchmark lending rates and has incrementally shifted from a quarterly reset for individual loans to a monthly reset to reduce the impact of transmission of rate changes,” it said.

The expected credit loss for the lender was down 25 per cent YoY to Rs 514 crore in Q1FY23. It is carrying provisions of Rs 13,328 crore. The provisions carried as a percentage of the exposure at default (EAD) is equivalent to 2.30 per cent.

Asset quality improved as non-performing loans (NPL) declined to 1.78 per cent from 1.91 per cent a quarter ago, led by healthy collection efficiency, which stood at 99 per cent for the individual segment. 

While NPL in the individual segment was 0.98 per cent, the non-individual segment saw NPL of 4.44 per cent.

The mortgage lender saw a healthy credit growth of 16 per cent to Rs 5.81 trillion. Based on assets under management (AUM), the individual segment grew 19 per cent YoY – the fastest growth in the past 32 quarters.

During the quarter, individual loan disbursements grew by 66 per cent. Disbursements during the quarter marked the highest-ever disbursements for the corporation in the first quarter of any financial year, so far, it said.

“Demand for home loans and the pipeline of loan applications continue to remain strong. Growth in home loans was seen in the middle-income segment and in high-end properties,” the corporation said.

In July 2022, the Reserve Bank of India (RBI) increased the limit of external commercial borrowing (ECBs) under the automatic route from $750 million to $1.5 billion. HDFC Ltd is in the process of raising funds under this window of about $1.1 billion.

“Both stock exchanges, the PFRDA, and the RBI have accorded no objection for the merger (of HDFC Ltd into HDFC Bank). An application has been made to the CCI and we are awaiting approval,” said Keki Mistry, vice-chairman & CEO, HDFC Ltd.