HDFC: It's business as usual

In a difficult environment, the home loan firm has turned in reasonably good results

The Housing Development Finance Company (HDFC) stock slipped around 4.5 per cent on Wednesday to Rs 2,410 after the home loan company announced results for the June 2009 quarter. The Street was perhaps somewhat disappointed with 13 per cent growth in the loan book — HDFC has typically clocked growth of at least 20 per cent and this is the lowest increase in several quarters.

However, it’s possible there was some amount of pre-payment of loans during the quarter. Nevertheless, business appears to be picking up with sanctions and disbursements during the quarter growing a reasonably good 23 per cent and 21 per cent, respectively.

It should be remembered that HDFC has been securitising assets — in the March 2009 quarter, loans amounting to around Rs 4,000 crore were securitised. Over a 12-month period, the amount has been close to Rs 6,000 crore. The 11 per cent year-on-year growth in net interest income in the June quarter may not have been very strong but was creditable given the challenging environment.

HDFC’s portfolio remains as clean as ever with non-performing loans (due for over six months) down to 0.58 per cent from 0.71 per cent at the end of June 2008. The HDFC stock has had a good run — since the start of the year, it has gained 60 per cent compared with around 50 per cent rise for the Sensex. Since April, the stock has risen 71 per cent compared with just 53 per cent gain for the Sensex. Analysts put a sum-of-the-parts value to the stock of Rs 2,500-2,700 per share.