Financial Daily from THE HINDU group of publications
Saturday, May 08, 2004
Financial Daily from THE HINDU group of publications Saturday, May 08, 2004 |
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Money & Banking
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Housing Finance Columns - Microscope HDFC: Lower repayments prop up growth Suresh Krishnamurthy
A SHARPER fall in interest costs has helped HDFC give its habitual push to earnings in the last quarter of the just-ended financial year. Customarily, lending activity peaks in the last quarter of the financial year for HDFC. It has in this year, too. Disbursements in the quarter ended March 2004 were 34 per cent of the year's disbursements, similar to the proportion for 2002-03. Interest costs fell even as income from operations increased indicating that spreads (rate at which loans are lent less rate at which funds are borrowed) continue to widen for HDFC. Such expanding spreads along with increased lending resulted in profits for the quarter ended March 2004 rise 63 per cent over the quarter ended December 2003. This is almost identical to the rise in profits notched in March 2003 vis-à-vis that of December 2002. In the year-ended March 2004, expansion in spreads has been lower compared to the year ended March 2003. This was compensated, to an extent, by an increase in balance sheet size. Growth in repayments of loans has been muted in 2003-04 compared to growth in disbursements. These factors, however, would not have been enough to report a profit growth of 23 per cent in 2003-04. In 2002-03, HDFC, despite large expansion in spreads, reported only a 19 per cent growth in profits. Higher contribution from fee income and profits on sale of investments has been major factors in the latest year. In addition, provision for taxes, which rose 45 per cent in 2002-03, rose less than 10 per cent in the just-ended year, contributing to profit growth. In terms of outlook for 2004-05, growth in profits is now entirely dependent on loan volume growth. Pressure on spreads is also likely, as competition could intensify further. The focus is now more likely to shift to the performance of the subsidiaries and associates of HDFC. The ventures in insurance and asset management have been doing well and the prospects appear promising. This is reflected in the near 29 per cent growth in consolidated profits in 2003-04. Consolidated profits rose only 18 per cent in 2002-03 and the stage now seems set for larger contribution from its subsidiaries and associates.
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