Comments
With interest rates declining over the last one month, obtaining post-tax returns that also beat inflation is becoming tougher.
Given this backdrop, investors looking for higher returns may not get them without taking higher risks. Fixed deposit of Dewan Housing Finance is such an option.
Credit rating
The credit rating for the fixed deposit is Care AA plus which is one notch below the highest credit rating.
The 36-month deposit of Dewan Housing offers 10.77 per cent annualised yield on the cumulative option. This rate is attractive compared with other NBFC deposits. Deposit-taking NBFCs such as Sundaram Finance, Mahindra Finance and Shriram Transport Finance offer 10.38 per cent, 10.25 per cent and 10.75 per cent respectively. The rates offered by other housing finance companies with higher ratings such as HDFC, LIC Housing Finance and PNB Housing Finance are 9.4 per cent, 9.5 per cent and 9.7 per cent respectively.
Investors can consider the three-year option on the Dewan Housing deposit because policy rates are expected to decline after a few months. This implies more downside on the deposit rates front.
Banks which score much higher on the safety aspect, offer 9.5 per cent on three year deposits. The rates were close to 10 per cent at the beginning of the calendar year.
Investors have to note that unlike banks Dewan Housing doesn’t have deposit insurance of upto Rs 1 lakh, which would mean the degree of safety is not as high as bank deposits.
The post-tax returns for the 36-month cumulative option for investors in 10-, 20- and 30 per cent tax bracket works out to 9.64 per cent, 8.53 per cent and 7.44 per cent respectively. Senior citizens, shareholders of Dewan Housing, widows, armed force personnel and existing home loan borrowers of Dewan Housing would get an additional 50 basis points over the card rate.
company details
Dewan Housing has consolidated loans under management of Rs 29,000 crore with individual housing loans accounting for a major chunk. While the company is predominantly present in rural and semi-urban areas, secured nature of the loans with average loan to value ratio of 66 per cent reduces the risk of default considerably. The net NPA ratio of Dewan Housing Finance is 0.13 per cent while its subsidiary First Blue Housing has no NPAs. The net profit of Dewan Housing has grown at an annualised 43 per cent over the three years ended March 2012. The standalone net profit for the year ended March 2012 was Rs 306 crore and quarter ended June 2012 was Rs 77.8 crore.
The capital adequacy ratio of Dewan Housing is 17.6 per cent as of June 2012 with tier-1 capital ratio at 13 per cent.
> santosh.majeti@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.