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A tepid housing mkt is no dampener for HDFC's Q3 results
A tepid housing market is unlikely to dampen Housing Development Finance Corporation’s (HDFC) third quarter numbers, according to analysts tracking the company. India’s largest mortgage lender is expected to report around 13% year-on-year increase in net profit to Rs 1174 crore, according to the average of the estimates of three brokerages.
A tepid housing market is unlikely to dampen Housing Development Finance Corporation 's (HDFC) third quarter numbers, according to analysts tracking the company. India's largest mortgage lender is expected to report around 13% year-on-year increase in net profit to Rs 1174 crore, according to the average of the estimates of three brokerages. Net interest income (NII) or the difference between interest earned and paid out, is expected to rise 20% to Rs 1,078 crore, as HDFC loaned money directly to rated property developers, to offset lower demand from retail customers. The company's loan book is expected to grow 21% year-on-year. "During the quarter the lender tried to fulfill the shortage of dried up retail loan market by focusing more to real estate developers," Manish Ostwal, an analyst from K R Choksey brokerage told moneycontrol.com. "However, once the home loan market revives HDFC would again push for retail loans. Currently, retail loans form around 67% of their book and the rest (33%) is constituted by real estate developers. It is a mitigating tactic for the lender to maintain the pace of loan growth," he said. The brokerage firm has a target price of Rs 787 for 12 months from the current level. HDFC shares on Wednesday closed at Rs 680, down nearly 1% over their previous close. It is learnt that many banks are now averse to lending to real estate developers on fears that the loans may go bad. A sharp rise in property prices in most key cities has caused demand to dry up, thereby hurting builders' ability to repay their loans. In markets like Mumbai, builders have been reluctant to lower prices even if it means facing a liquidity crunch in the short term.
"The lender's focus on developers is a short-term but cautious approach. Moreover, it is only giving loans to rated developers with good track records," said an analyst on condition of anonymity. According to a research report by brokerage firm Motilal Oswal, rise in fee income is likely to continue. However, investment gains are likely to be lower. "We model in investment gains of Rs 95 crore against Rs 170 crore in 3QFY11. Dividend income is likely to remain high at Rs 650 million. Asset quality has remained healthy over the last several quarters and the trend is likely to continue," it said.
HDFC Q3: Expectations at a glace (On an average) Loan growth 21% Y-o-Y Net Profit 13% Y-o-Y NII 20% Y-o-Y
