Macro Economy

Analysts see HFCs posting steady growth

Satyanarayan Iyer Mumbai | Updated on July 14, 2014

Mortgage majors to declare first quarter results next week

A steady growth in business for housing finance companies (HFCs) is likely with their first quarter results set to be announced next week.

The first among the majors to report its earnings will be the country’s largest standalone housing finance company, Housing Development Finance Corporation (HDFC). Analysts believe the company will be able to maintain its guidance of 18 to 20 per cent growth in assets under management.

HDFC’s performance

Mangesh Kulkarni, Research Analyst at Almondz Global Securities, thinks HDFC’s performance is likely to be steady. “In all likelihood, there will be no negative or positive surprises in HDFC’s numbers,” he said. The company is also expected to maintain its gross non-performing assets at less than one per cent of its total advances.

In the fourth and final quarter of the last fiscal, the company posted 11 per cent growth in its net profit, driven mainly by a higher growth in its individual loan book segment, which forms a bulk of its loan book.

Kulkarni believes the profitability of HDFC could remain at the same levels in the first quarter also, as the provisions are likely to remain at the same level as in the fourth quarter.

ICRA report

What is true of HDFC could be true of its smaller peers when they declare their results — Dewan Housing Finance (July 24), LIC Housing Finance (July 25) and Indiabulls Housing Finance (August 11). This is also borne out by an analysis by ratings agency ICRA which has predicted that for the current financial year too, housing credit will increase by an average of 20 per cent as the previous year.

The report added that despite a high interest rate scenario and difficult operating environment, HFCs have been able to report good asset quality indicators with a gross NPA percentage at 0.73 per cent as on March 31, 2014.

Analyst Vishal Narnolia of SMC Global Securities also thinks the growth of HFCs in the first quarter will mimic the growth in the fourth quarter and margins will remain largely stable.

From the third quarter onwards growth is likely to pick up pace, according to Narnolia. As the government implements its plans on affordable housing and housing for all, HFCs will benefit immensely from higher mortgage penetration.

Published on July 14, 2014

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