We present below the HDFC – Q4 FY20 (Cons - Audited), CMP – 1,516
Total Income from ops at 16,600 Crs 28,747 Crs YoY (-42.22%) 29,072 Crs (-42.93%) QoQ
Year ending: 101,725 Cr vs. 95,915 Cr (6.05%)
Net Profit of 4,341 Cr
4,811 Cr YoY (-9.72%) 4,196 Crs (3.47%) QoQ
Year ending: 22,826 Cr Vs. 17,580 Crs (29.88%)
EPS (in Rs.) 21.93
26.00 YoY | 21.95 QoQ
Year ending EPS: 123.19 Vs. 94.66
Gross NPA ratio at 1.99% vs 1.36%
View: The result is below expectations. YoY and QoQ total income decreased significantly but bottom line managed due to reversal of changes in life insurance contract liabilities and surplus in the tune of INR 7,462 Cr and also benefit of corporate tax reduction. Additional Provision including
provisioning for the impact of COVID – 19 of INR 5,913 Cr (PY: INR 935 Cr).
Business Highlights & Updates
NII Income for the Q4FY20 grew by 17% to stand at INR 3,780 Cr on a standalone basis. NII for the FY20 is around INR 12,904 Cr Vs. 11,457 Cr in Previous year growth of 13% in YoY.
Fair value gain on an amalgamation of Gruh Finance Limited (Gruh) with Bandhan Bank Limited of INR 9,020 Cr (PY: Nil).
Gross NPA as at March 31, 2020 stood at INR 8,908 Cr. This is equivalent to 1.99% of the loan portfolio.
Capital Adequacy ratio stood at 17.7% of which Tier I capital was 16.6% and Tier II Capital was 1.1%.
Lending Business
Total Individual loan approvals grew by 14% in volume terms and 12% in value terms. Disbursements grew by 7%. The average size of individual loans stood at INR 27 lacs.
As of March 31, 2020 the loan book stood at INR 450,903 Cr Vs. 4,06,607 as of March 31, 2019. The loan book grew by 11% during the FY20.
As of March 31, 2020, individual loans comprise 76% of the AUM. On an AUM basis, the growth in the individual loan book was 14%. The growth in the total loan book was 12%.
As of March 31, 2020, the outstanding amount in respect of individual loans sold was INR 65,695 crore. HDFC continues to service these loans. The growth in the individual loan book, after adding back loans sold in the preceding 12 months was 21 %. The growth in the total loan book after adding back loans sold was 17%.
During the year ended March 20, 36% of home loans approved in volume terms and 18% in value terms have been to customers from the EWS and Low-Income Groups.
The Corporation has adopted an 'opt-in' structure for the moratorium. As of date, approximately 26% of the Corporation's loans under management have opted for the moratorium. Individual loans under moratorium account for 21 % of the individual loan portfolio.
Spread and Margin
The spread on loans over the cost of borrowings for the year ended March 31, 2020 was 2.27%. The spread on the individual loan book was 1.92% and on the nonindividual book was 3.14%.
As at March 31, 2020, the unaccounted gains on listed investments in subsidiary and associate companies amounted to INR 1,54,461 crore.
HDFC's Investments
The non-bank lender completed the acquisition of Apollo Hospitals Group's stake in Apollo Munich Health Insurance during the quarter.
HDFC acquired a 51.16 percent stake for Rs 1,495 crore. Subsequent to this acquisition, Apollo Munich Health Insurance remained as HDFC ERGO Health Insurance and it became a wholly-owned subsidiary of HDFC. It was subsequently merged with HDFC ERGO through a share-swap deal.
It also invested a sum of Rs 200 crore in Yes Bank Ltd. as part of its rescue plan along with a consortium of lenders led by State Bank of India.
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Board of Directors of the Company at its meeting held on May 25, 2020, inter alia, has recommended a dividend of Rs. 21 per equity share of the face value of Rs. 2 each for the financial year 2019-20
ROE and ROCE is around 17 and 11% respectively and book value per share is around INR 499 and share is currently trading at 3.2x of its book value. The company is currently trading at annualized PE of around 16 which is high as per Industry benchmark. FIIs, mutual fund, and insurance cos hold around 70.8%, 9.5%, and 8.06% respectively.
Share price high 2,499 (52 week) and now 1,516 more than 35% corrected from their peak. Housing Development Finance Corporation Limited is an Indian financial services company. It is a major provider of finance for housing in India. It also has a presence in banking, life and general insurance,
asset management, venture capital, realty, education, deposits and education loans. HDFC's distribution network spans 585 outlets which include 206 offices of HDFC's distribution company
Long term investors with horizon of 3-4 years can add the share on SIP basis it can deliver good returns in the long term.
Opportunities: Share corrected around 35% from their peak pursuant to pandemic during Covid – 19 and NBFC overall sector stress. Strong FIIs hold in the bank and recently bank of China also acquired some stake in HDFC. Long term big NBFC player can have good growth in overall based on their strong market leading position.
Risk: As on March 31, HDFC's provisions stood at Rs 10,988 crore—Rs 6,800 crore above regulatory requirements. The company made an additional provisioning of Rs 5,913 crore in FY20, including Rs 1,274 crore for Covid-19-related stress on the loan book. About 26 percent of total assets under management have opted for a moratorium on loan repayments. Q1 and Q2
will be more challenging for the NBFC sector.
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