HDFC gains 3% as Q3 PBT jumps 219% YoY on fair-value gain from Gruh Finance

Shares of HDFC advanced 3.13 per cent to Rs 2,470.85 on the BSE on Tuesday after the housing finance firm posted a strong December quarter result on Monday. The non-banking finance company (NBFC) reported a 219 per cent rise in profit before tax (PBT) at Rs 9,143 crore in the third quarter of the current financial year mainly aided by a one-time fair value gain of Rs 9,020 crore.

At 9:41 am, the stock was trading 2.47 per cent higher at Rs 2,454.9 apiece on the BSE, as against a 0.3 per cent rise in the S&P BSE Sensex. So far, over 2.36 million shares have changed hands on the counter on the NSE and BSE.

For the quarter under review, the company received a fair value gain of Rs 9,020 crore from de-recognition of investment in Gruh Finance, which got merged with private sector lender Bandhan Bank, it said in a statement. Gruh Finance was the affordable housing arm of HDFC.

Besides, the mortgage lender booked a 296 per cent rise in net profit at Rs 8,372.49 crore in Q3FY20, against Rs 2,113.80 in Q3FY19. However, profit before dividend, sale of investments, fair value changes, and provision for losses grew 7 per cent year-on-year (YoY) at Rs 3,075.43 in Q3FY20, against Rs 2,873.62 crore in Q3FY19.

As for the loans disbursed during the recently concluded quarter, the overall loan book grew 13.4 per cent to Rs 4.41 trillion, from Rs 3.89 trillion in the year-ago period. The individual loan book grew more than 16 per cent YoY and the corporate book grew 6 per cent.

"Over the past four quarters, HDFC has maintained steady retail loan growth of 16-17% YoY while curtailing wholesale disbursements – the share of wholesale loans in overall AUM is down 200bp to 24%. In the current liquidity scenario, HDFC has received a disproportionate share of funds across sources, including banks, MFs, life insurers and deposits. We expect the company to largely maintain spreads as the cuts in home loan rates are offset by declining cost of funds and opportunistic non-individual loan growth," wrote analysts at Motilal Oswal Financial Services in an earnings review note. The brokerage firm has a 'buy' rating on the stock, with a target price of Rs 2,875.

On the downside, the housing finance company 's provisions went up substantially in the third quarter. In Q3FY20, the company provided Rs 2,995 crore for loans, against Rs 116 crore in Q3FY19. “We have been extremely conservative in our provisioning. That’s the policy we have followed all these years and we continue to remain conservative in our provisioning,” said Keki Mistry, vice-chairman and chief executive officer of HDFC.

That apart, the gross non-performing assets (NPAs) at the end of Q3FY20 stood at 1.36 per cent of the loan portfolio, against 1.22 per cent in the year-ago period, up 14 basis points.