DHFL rallies 6% as Q2 net profit jumps 52%

Shares of Dewan Housing Finance Corporation (DHFL) rallied as much as 6 per cent to Rs 238.65 apiece in intra-day deals on Wednesday, after the company reported a 52 per cent year-on-year (YoY) increase in its net profit at Rs 4.38 billion for September quarter of FY19. The company had posted profit of Rs 2.87 bilion in the year-ago period. The counter ended the day at Rs 235 levels, up around 4.3 per cent over its previous close.

Total revenue from operations stood at Rs 35.15 billion, up 34 per cent YoY against Rs 2.87 bilion posted in the corresponding quarter of last fiscal. Basic earnings per share (EPS) during the period came in at Rs 13.98 against Rs 9.18 in the September quarter of FY18.

Kapil Wadhawan, Chairman and Managing Director at DHFL said, "“Our performance this quarter is well in line with our QoQ growth momentum. During the quarter in review, DHFL maintained robust performance led by loan growth disbursements in the affordable housing segment. Considering that two-thirds of DHFL’s home loan portfolio is retail home loans wherein our average home loan ticket size is below 11 lakhs, DHFL has endeavored to protect margins at 300 to 305 bps."

On the recent slump in the financial services sector, specifically NBFCs, Wadhawan said that DHFL has taken every step towards mitigating these issues. "The company has been diligent towards all its repayments and fulfilled every financial obligation," Wadhawan added.

The stock of DHFL has been under pressure ever since mid-September due to the funding crunch triggered by the crisis at IL&FS. The stock has tumbled over 63 per cent since September 14. At 02:45 pm, the stock was trading at Rs 235 apiece on BSE. 

At a fundamental level, analysts at Morgan Stanley suggest that while the current problems will cause a slowdown in loan growth for the overall NBFC/HFC group, the stronger entities will continue to get funding to build their loan books at a healthy pace. 

"Not all NBFCs/HFCs are equal, in our view. We divide them into those with strong parentage/long vintage and those with lesser vintage. The strong ones account for two-thirds of NBFCs/HFCs overall and have posted a 15% loan CAGR during F15-18. The latter grew at 26%, buoyed by easy and cheap liquidity. We expect stronger entities collectively to sustain mid- to high-teens growth rates as they get a disproportionate share of the liquidity available to the group. The lesser-vintage entities will face sustained funding challenges (against a backdrop of higher global rates), causing a slowdown from the high growth rates of recent years," they wrote in a recent report.