Here's what to expect from HDFC Q4 earnings

Moneycontrol Bureau

India's largest mortgage lender - Housing Development Finance Corporation (HDFC) is likely to report 15 percent year-on-year growth in its fourth quarter (Jan - March) net profit at Rs 1,531 crore. Net interest income (NII) or the difference between interest earned and paid out, would grow 24 percent Y-o-Y to Rs 2,080 crore, according to a poll estimate by CNBC TV18.

"Overall HDFC does not have any specific concern," Ravikant Bhat, a banking analyst from SBICAP Securities told moneycontrol.com.

"However, business growth looks to be the only challenge. We also need to see if the lender is getting any sign of stress from its large home loan portfolio. Loan book is expanding at a CAGR of around 22 percent. For funds, it has decreased dependence on bank borrowings, which is a positive."

Loans are expected to expand in the range of 19-21 percent Y-o-Y. Home loans would be a key contributor in this credit growth. In October – December quarter, loans grew 21 percent YoY. The share of individual loans was at 65.6 percent on total book.

The housing finance company borrows money from multiple sources like public deposits, bonds and debentures as well as banks loans. Among them bank loans tend to be expensive. Analysts on an average are convinced about the composition of borrowing book. A lower cost of funds will help HDFC post better net interest margin.

For the quarter ended December 31, FY13, its share was at 9 percent (of total borrowings) as against 20 percent in the corresponding quarter of the previous year. During the same period, public deposits stood at 33 percent compared with 27 percent a year back. Bonds and debentures were at 57 percent versus 53 percent a year ago.

Since last one year HDFC shares jumped about 29 percent as against 18 percent rise in the 50-share Nifty – the broader index. A section of analysts believe, there is not much upside for HDFC shares. However, long term investors can buy at every significant fall.

Currently, HDFC eight subsidiaries like HDFC Bank, HDFC Life, HDFC Asset Management and others. Most of them are profit-making and adequately capitalized. In fourth quarter too, analysts expect fair contribution from those adding to the consolidated margins.

saikat.das@network18online.com