HDFC bottom line up 25%, declares dividend of Rs 22

HDFC has recorded a rise of 25 per cent in net profit at Rs 1570.38 crore for the year ended 2006-07, compared with Rs 1257.3 crore for last year.

While the company has recommended a dividend of Rs 22 a share, its fully diluted earnings per share improved to Rs 58.25 in 2007, compared with Rs 48.44 a year earlier.

Keki Mistry, managing director, HDFC, said that he did not see the interest rates going up for the next six months as inflation was under check and several measures have already been taken. The company's interest income for the year grew by 40 per cent at Rs 5,314.03 crore compared with Rs 3,786.32 crore last year . The total income included interest income, other operating income, fees and other charges. Other income, primarily on fee-based business, stood at a total of Rs 5,896.26 crore, a growth of 37.8 per cent over Rs 4,278.38 crore in the previous year.

Total expenditure shot up to Rs 3,911 crore against Rs 2,491 crore last year. Major part of the expenditure consisted of interest and other charges which stood higher at Rs 3,666 crore. Incidentally, a major increase in interest charges was seen in the fourth quarter of the financial year, reflecting the dependence of the company on market borrowings for lending operations and considerable hike in the market borrowing rates.

Interest charges shot up to Rs 1,004 crore in the fourth quarter ended March 31, 2007. The net profit for the fourth quarter has gone up by only 30 per cent, from Rs 426 crore in the fourth quarter last year to Rs 550 crore this year. Since the company has raised its lending rates, the interest income for the fourth quarter has moved up by 60 per cent to Rs 1626 crore from Rs 1,081 crore in the same quarter last year. HDFC increased its lending rates three times during the year from April 1, 2006 to March 31, 2007 by 50 basis points in May, August and 75 bps in March 2007, for a total increase of 175 basis points. The last revision in the prime lending rate was 13.5 per cent from 12.75 per cent in March 2007.

The yield on loans for 2007 is 9.67 per cent compared with 8.66 per cent in 2006. The cost of funds increased to 7.49 per cent for 2007 compared with 6.5 per cent in 2006. Conrad D'Souza, senior general manager for treasury at HDFC, said, "We have maintained our spread at 2.18 per cent despite volatile conditions as a result of prudency in avoiding interest rate and maturity mismatches."

"We didn't see a drop in home loan demand as you can see that our disbursements and loan approvals have grown in line for the last 10 years, and this quarter has been no different. Our objective is to grow the loan disbursements by 25 per cent in FY08," he added. The loan portfolio, inclusive of investments in debentures, pass through certificates, security receipts and inter corporate deposits for financing real estate projects, on March 31 is Rs 57,988 crore compared with Rs 46,492 crore in the previous year, representing a growth of 25 per cent.

The non performing loans (90 days overdue ) fell by 0.04 per cent at 0.92 in FY2007 compared with 0.96 in FY2006.

Due to the high risk weightage for mortgage, which increased in April 1, and growth in business, the capital adequacy ratio fell to 12.9 per cent in FY2007 compared with 15.0 in FY 2006. Provision for contingencies stood at Rs 409.66 crore for FY2007 compared with Rs 380.45 crore in FY2006.

For the last quarter of 2007, the sanctions stood at Rs 10, 666 compared with Rs 7,857 crore in the corresponding quarter of 2006, and loan disbursements stood at Rs 8,713 crore compared with Rs 6,874 crore for the same quarter last year.