Rest of FY14 to be alike Q2 unless RBI hikes rates: DHFL

The next two quarters -- i.e. Q3, Q4 -- of FY14 are likely to be similar to the company performance seen in Q2, says Kapil Wadhawan, chairman and managing director, Dewan Housing Finance (DHFL).

Speaking to CNBC-TV18 after posting good set of Q2 numbers, Wadhwan says unless the Reserve Bank of India (RBI) hikes interest rates in the upcoming monetary polices, the financing company will be able to maintain its NIMs.
The company has reported a standalone sales turnover of Rs 1,166.82 crore and a net profit of Rs 129.14 crore for the quarter ended Sep '13. Other income for the quarter was Rs 0.38 crore. Below is the edited transcript of Wadhwan’s interview to CNBC-TV18. Q: It has been a good quarter for the company this time around – the net interest margins as well has been stable – can you just give us a sense of how the quarters to come will progress in terms of top-line, bottom-line – do you think you could do better than what you did this quarter?
A: It is dependant on the overall cost of funding. If the cost of funding on the back of what the Reserve Bank of India does remain stable, then we will continue to see a stable net interest margin, we will continue to see decent growth both in approvals, disbursements and top-line, bottom-line. But this quarter has been fairly encouraging.
Infact, the first half year has been fairly encouraging. We have recorded 50.5 percent growth in top-line for the first half of the year as compared to the previous year on the back of a decent growth in disbursements and sanctions. We have consolidated first few home finance as well so these numbers are like to like comparisons and the bottom-line has also grown above 20 percent. Q: You managed your margins very well I must say from what was a tough quarter – 2.7 percent unchanged from the previous quarter – you will be able to maintain that or did you have to pick up some expensive funds which will show in this quarter?
A: Yes, it has been a tough quarter but we have been maintaining our margins well. We have been on the back of whatever we could borrow in a cost effective fashion from the market, we continue to borrow and lend at a decent spread.
The next two quarters look nearly the same as the first two. Unless there are too many surprises on the cost front coming from the RBI, barring the expectation of a 25 basis point hike, margins will be maintained where they are. Q: If that comes that rate hike to 7.75 percent on the repo and is accompanied by the marginal standing facility (MSF) rate coming down to 8.75 percent – will base rates and home loan rate change. Will life change for you?
A: In the last quarter we have upped our home loan rates by 25 basis points. It is a function of cost of funds. Assuming that the base rates move up we will be left with no choice but to pass on that increase to our existing customers as well as increase our rates for fresh loans. I think it is a question of where the cost of funds are.