HDB Financial Services Q1 net profit nosedives on Covid-19 impact

Asset quality takes hit with NPAs surging to 7.75%

HDB Financial Services Ltd (HDBFSL’s), subsidiary of HDFC Bank, posted a sharp drop (43.9 per cent) in net profit at Rs 130.6 crore in the first quarter ended June 2021 (Q1FY22) from Rs 232.7 crore a year ago. The second wave of Covid-19 hit the business volumes and collections in Q1FY22.

HDBFSL’s net income in the reporting quarter was almost flat at Rs 1,655.8 crore as against Rs 1,609.7 crore for the quarter ended June 30, 2020 (Q1FY21). HDFC Bank holds 95.1 per cent stake in non-banking finance company.

The Provisions and contingencies for the reporting quarter rose to Rs 472.4 crore as against Rs 453.5 crore for the quarter ended June 30, 2020. The Gross non-performing assets (GNPAs) based on the approach used for NBFCs jumped to 7.75 per cent in June 2021 from 2.86 percent as on June 30, 2020 and 3.89 per cent as of March 31, 2021.

The total loan book rose marginally to Rs 57,390 crore as on June 30, 2021 as against Rs 56,613 crore as on June 30, 2020.

With the country being hit by a “second wave”, business activities remained curtailed for almost two thirds of the quarter. These disruptions led to a decrease in loan originations as well as efficiency in collection efforts. This has resulted in muted business volumes, revenues, as well as a higher provisioning, HDFC Bank said in statement.

However the capital profile of the finance company remained robust as Capital Adequacy Ratio (CAR) stood at 19.8 per cent with Tier-I CAR at 14.9 per cent.

As on June 30, 2021, HDBFSL, offering a wide range of loans and asset finance products to individuals, emerging businesses and micro enterprises had 1,321 branches across 957 cities / towns.