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HDFC Ltd Q2 FY2019-20 Results

HDFC Ltd Q2 FY20 Results Update

Key Highlights of HDFC Ltd Q2 FY20 Financials

Introduction

HDFC Ltd, India’s premier financier in mortgage lending, has reported 61% YoY growth in the net profits for Q2 FY20. Lets see the key highlights of HDFC Ltd Q2 FY20 results in this article.

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

HDFC Ltd Q2 FY20 Results Update

Q2 FY2019-20 Financial Results

HDFC Ltd Q2 FY20 Results Update
HDFC Ltd Q2 FY20 Results Update
  • Total Interest Income
    • In Q2 FY20, Total Interest Income of the company increased by 10.36% from Rs.9,94, Cr in Q2 FY19 to Rs.10,478 Cr in Q2 FY20.
    • It is mainly because of the substantial growth in the loan book.
  • Net Interest Income (NII)
    • We can calculate, Net Interest Income= Total Interest Income – Interest Expended
    • NII for the quarter ended September 30, 2019 stood at Rs.3,021 Cr as compared with Rs.2,594 Cr in Q2 FY19, with a growth of 16.5%. It is the core income for the company.
  • Dividend Income has seen a sharp growth of 185% YoY, increased to Rs.1,073.8 Cr in Q2 FY20 from Rs.5.77 Cr in Q2 FY19.
  • Profit from Sale of Investments also added Rs.1,627 Cr to the Net Profit of the company from the part stake sale in Gruh Finance.
  • Net Profit
    • HDFC Ltd has reported a 61% Y-o-Y growth in standalone net profit at Rs.3,961 Cr for the September quarter of FY20. While, the housing finance firm had posted Rs.2,467 Cr profit in the corresponding quarter last year ie. in Q2 FY19.
    • Due to corporate tax rate cuts, the tax paid in Q2 FY20 is decreased by almost 35% from Rs.733 Q2 FY19 Cr to Rs.473 Cr in Q2 FY20. The net effect is improved profit after tax (PAT).
    • This is inclusive of 3 main heads :
      1. Profit on sale of investments on part stake sale of GRUH Finance of Rs.1,627 Cr during the Q2 FY20
      2. Dividend Income of Rs.1,073.8 in Q2 FY20
      3. Corporate Tax Rate Cut Effect

Q2 FY20 Balance sheet summary and Key Ratios

 HDFC Ltd Q2 FY20 Balance sheet summary and Key Ratios
HDFC Ltd Q2 FY20 Balance sheet summary and Key Ratios
  • As on September 30, 2019, the gross loan book stood at Rs.4,26,739 Cr as against Rs.3,81,950 Cr in the previous year, that is grown by 11.7% Y-o-Y.
  • The borrowings in Q2 FY20 is Rs.3,88,976 Cr increased at 14.2% Y-o-Y from Rs.3,40,622 Cr in Q2 FY19. While, if we consider the quarterly growth, borrowings are increased at 4.1% from Rs.3,73,629 Cr.
  • HDFC Ltd’s Capital adequacy ratio (CAR) was seen to be 19.6% in Q2 FY20 from 18.8% in Q1 FY20 and increased from 18.4% last year Q2 FY19. Thus, it is improved on Q-o-Q as well as Y-o-Y basis.
  • Net Interest Margin (NIM) remained flat Q-o-Q as well as Y-o-Y at 3.3%.
Asset Quality
  • In Q2 FY20, HDFC Ltd has seen a slight deterioration in asset quality as a result of macroeconomic slowdown.
  • Gross NPA at 1.33% stood higher compared on Q-o-Q as well as Y-o-Y basis. Gross NPA was 1.13% in Q2 FY19 and 1.29% in Q1 FY20. So we can see the erosion in the asset quality.
  • Both Individual NPA and Non-individual NPA have seen a considerable growth in Q2 FY20 compared to Q2 FY19 and Q1 FY20.

Advances & Borrowings Mix

HDFC Ltd Q2 FY20 - Advances & Borrowings Mix
HDFC Ltd Q2 FY20 – Advances & Borrowings Mix
Advances Mix
  • As we have seen above, the gross loan book of HDFC Ltd has seen a growth of 11.7% Y-o-Y and 2.4% Q-o-Q.
  • About 76% of its loan book comprises individual ie. retail loans and the remaining is corporate loans which includes commercial real estate loans, lease rental discounting, etc.
  • The major share in the gross loan book is of individual loans and it is increasing consistently year-on-year as well as quarter-on-quarter basis. Individual loans are contributing around 69%, 71% and 72% of the total gross loan book for the quarters Q2 FY19, Q1 FY20 and Q2 FY20 respectively.
  • On the other hand, corporate loans contribute around 26% of gross loan book in Q2 FY20, with a consistent decrease in its share in gross loan book, ie from 27% in Q1 FY20 and 29% in Q2 FY19.
  • Given the uncertainty and risk averseness in the lending environment for corporate or non-individual loans, the company opted to be prudent by imposing the restrictions on the segment. The slackened corporate loan growth is in-line with company’s stance of scaling down riskier portfolio.
  • Almost 76% of the loan book composition is tilted in favor of individual segment on which we can expect significant increase in competition in the housing loan space from banks. Thus, there will be increased competitiveness in the individual loans segment. As a result, the overall gross loan book growth will get impacted with continuous reduction in the corporate loan growth.
Borrowing Mix
  • HDFC Ltd’s total Borrowings are comprised of :
    1. Term Loans
    2. Bonds/Debentures/Commercial Papers and
    3. Deposits
  • As we can see from the above graph, there is a gradual increase in the share of Term Loans from 18% to 23% to 22% in the quarters Q2 FY19, Q1 FY20 and Q2 FY20 respectively.
  • On the contrary, a consistent negative growth is seen in the share of bonds, debentures and commercial papers from 54% to 47 % to 47% in the quarters Q2 FY19, Q1 FY20 and Q2 FY20 respectively.
  • While the growth of deposits share was slightly growing, share was changed from 28% to 30% to 31% in the quarters Q2 FY19, Q1 FY20 and Q2 FY20 respectively.
HDFC Ltd Q1 FY2019-20 Results

HDFC Ltd Q1 FY20 Results Review

Key Highlights of HDFC Ltd Q1 FY20 Financials

Introduction

HDFC Ltd, India’s premier financier in mortgage lending, has reported 46% Y-o-Y growth in the net profits for Q1 FY20. Lets see the key highlights of HDFC Ltd Q1 FY20 results in this article.

HDFC Ltd Q1 FY20 Results Update

Q1 FY2019-20 Results

HDFC Ltd Q1 FY2019-20 Results
  1. Net Interest Income :
    • NII for the quarter ended June 30, 2019 stood at Rs.3,042 Cr as compared with Rs.2,743 Cr in Q1 FY19, with a growth of 11%. It is the core income for the company.
  2. Operating Profit :
    • 58% Y-o-Y growth was seen in the operating profits of the company to Rs.4,875 Cr in Q1 FY20 from Rs.3,090 Cr in last june ending quarter.
    • While, if we consider the sequencial quarterly growth, it is improved by 19% from Rs.4,089 Cr in Q4 FY19. Thus, we can say that the
  3. Net Profit :
    • HDFC Ltd has reported a 46% Y-o-Y growth in standalone net profit at Rs.3,203 Cr for the June quarter. While, the housing finance firm had posted Rs.2,190 Cr profit in the corresponding quarter last year ie. in Q1 FY19.
    • This is inclusive of the profit on sale of investments on part stake sale of GRUH Finance of Rs.1,894 Cr during the Q1 FY20, quarter ended June 30, 2019.

Q1 FY20 Balance sheet summary and Key Ratios

HDFC Ltd Q1 FY20 Balance sheet Summary and Key Ratios
  • As at June 30, 2019, the gross loan book stood at Rs.4,16,597 Cr as against Rs.3,74,575 Cr in the previous year, that is grown by 11.2% Y-o-Y.
  • The borrowings in Q1 FY20 is Rs.3,73,629 Cr increased at 12.5% Y-o-Y from Rs.3,32,078 Cr in Q1 FY19. While, if we consider the quarterly growth, borrowings are increased at 2.3% from Rs.3,65,266 Cr.
  • HDFC’s Capital adequacy ratio (CAR) was seen to be 18.8% in Q1 FY20 from 19.2% in Q4 FY19 and increased from 16.3% last year Q1 FY19. Thus, it is eroded on Q-o-Q basis but improved on Y-o-Y basis.
  • Net Interest Margin (NIM) remained flat Q-o-Q as well as Y-o-Y at 3.3%.
Asset Quality
  • In Q1 FY20, HDFC Ltd has seen a slight deterioration in asset quality as a result of macroeconomic slowdown.
  • Gross NPA at 1.29% stood higher compared on Q-o-Q as well as Y-o-Y basis. Gross NPA was 1.19% in Q4 FY19 and 1.18% in Q1 FY19. So we can see the erosion in the asset quality.
  • Both Individual NPA and Non-individual NPA have seen a considerable growth in Q1 FY20 compared to Q1 FY19 and Q4 FY19. Increase in the Gross NPA was attributable to Jet Airways being recognized as an NPA in the corporate book.
  • Expected Credit Loss (ECL) provisioning climbed to 1.55% from 1.44% in Q4FY19. However, the provision coverage ratio for stage-3 expected credit loss is still reduced to 40% from 44% in Q4 FY14. Here, stage-3 expected credit loss means the loans outstanding for greater than 90 days.

Advances & Borrowings Mix for q1 FY20

HDFC Ltd Advances and Borrowings Mix for Q1 FY20
HDFC Ltd Advances and Borrowings Mix for Q1 FY20
advances Mix
  • As we have seen above, the gross loan book of HDFC Ltd has seen a growth of 11.2% Y-o-Y and 2.4% Q-o-Q.
  • About 75% of its loan book comprises individual ie. retail loans and the remaining is corporate loans which includes commercial real estate loans, lease rental
    discounting, etc.
  • The major share in the gross loan book is of individual loans and it is increasing consistently year-on-year as well as quarter-on-quarter basis. Individual loans are contributing around 68.9%, 71% and 71.4% of the total gross loan book for the quarters Q1 FY19, Q4 FY19 and Q1 FY20 respectively.
  • On the other hand, corporate loans contribute around 26.9% of gross loan book in Q1 FY20, with a consistent decrease in its share in gross loan book, ie from 29.5% in Q1 FY19 and 27.3% in Q4 FY19.
  • Given the uncertainty and risk averseness in the lending environment for corporate or non-individual loans, the company opted to be prudent by imposing the restrictions on the segment. The slackened corporate loan growth is in-line with company’s stance of scaling down riskier portfolio.
  • 3/4th of the loan book composition is tilted in favor of individual segment on which we can expect significant increase in competition in the housing loan space from banks. Thus, there will be increased competitiveness in the individual loans segment. As a result, the overall gross loan book growth will get impacted with continuous reduction in the corporate loan growth.
Borrowings Mix
  • HDFC’s total Borrowings are comprised of :
    1. Term Loans
    2. Bonds/Debentures/Commercial Papers and
    3. Deposits
  • As we can see from the above graph, there is a gradual increase in the share of Term Loans from 16% to 21% to 23% in the quarters Q1 FY19, Q4 FY19 and Q1 FY20 respectively.
  • On the contrary, a consistent negative growth is seen in the share of bonds, debentures and commercial papers from 54% to 50% to 47% in the quarters Q1 FY19, Q4 FY19 and Q1 FY20 respectively.
  • While the growth of deposits share was flat, share was changed from 30% to 29% to 29% in the quarters Q1 FY19, Q4 FY19 and Q1 FY20 respectively.

Plan to raise Rs.45,000 Cr

HDFC Ltd has received its board’s approval for raising Rs.45,000 Cr via secured redeemable non-convertible debentures, in one or more tranches, on a private placement basis. 

Conclusion

  • After reporting Q1 results, the market capitalisation of HDFC is increased from Rs.3.66 Lakh Cr to Rs.3.77 Lakh Cr in two sessions.
  • Despite increasing competition, HDFC’s market leadership and profitability have remained intact, endorsing its strong competitive position.
  • HDFC’s conservative underwriting practices and the stance of scaling down riskier portfolio, reflect in the comparatively lower NPAs and credit losses.

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