HDFC gains 2%, hits new high on healthy individual loan disbursement in Q3

HDFC reported a healthy 26 per cent YoY pick-up in individual loan disbursement during the October-December quarter

Shares of Housing Development Finance Corporation (HDFC) hit a record high of Rs 2,623, up 2 per cent on the BSE on Tuesday in an otherwise subdued market after the housing finance company reported a healthy 26 per cent year on year (YoY) pick-up in individual loan disbursement during October-December quarter (Q3FY21).

“The individual loan business continued to see improvements during the quarter ended December 31, 2020. Disbursement growth over the corresponding quarter of the previous year was 26 per cent. Individual loans sold in the preceding 12 months amounted to Rs 16,956 crore,” HDFC said in a regulatory filing.

During the quarter ended Q3FY21, the profit on sale of investments was Rs 157 crore. This was on account of the sale of 2.55 million equity shares of HDFC Life Insurance Company (HDFC Life). The corporation’s shareholding in HDFC Life is now at 49.99 per cent. This has met the Reserve Bank of India (RBI’s) mandate of reducing the corporation’s shareholding in HDFC Life to 50 per cent or below by December 16, 2020, HDFC said in quarterly update.

In the past one month, the stock has outperformed the market by surging 17 per cent, as compared to 7 per cent rise in the S&P BSE Sensex. However, in the past one year, it underperformed by gaining 6 per cent, against 16 per cent rally in the benchmark index.

The strong disbursement trend in the festival season sustained throughout the quarter. We expect this to translate into low-to mid- teen assets under management (AUM) growth in individual loans for the quarter, Motilal Oswal Securities said.

"HDFC remains one of our preferred picks in the sector. We like HDFC’s ability to gain profitable market share despite significant competitive pressures. Additionally, contrary to initial expectations, the Real Estate market has seen a swift turnaround. With incremental cost of funds from the capital markets at 5–5.5 per cent, the company would be able to manage spreads despite the sharp cut in home loan yield. HDFC has built in large provision buffers to help it sustain a spike in non-performing lending (NPLs) in the coming quarters," the brokerage firm said in stock update.