Wednesday, May 5, 2010

HDFC PROPOSES STOCK SPLIT, LOAN BOOK HEALTHY AND GROWING

HDFC - THE CONSISTENT WEALTH CREATOR

This Post is after the May,3rd Post on this Blog on HDFC Results Review - and contains the Gist of the Board of Directors meeting APPROVALS / RECOMMENDATIONS dated 3rd,May,2010 . It would assist us in evaluating the company's further plans for stock split etc.

The facts coming out herein point out to the huge scope for unlocking value in the company and its subsidiaries.

Incidentally, HDFC has been rated as the country's most consistent wealth creator during the last 5 years - in an exhaustive study by MOTILAL OSWAL.

In my opinion, it will be consistent in wealth creation - in future also.

Its board has approved stock split from Rs.10 to Rs.2  (as can be seen in the details below) and is looking at ways of unlocking the huge hidden value in its subsidiaries for the benefit of Investors.

Most analysts tend to ignore this hidden value in its subsidiaries and even the consolidated EPS is often not taken into account - while evaluating the market price.

While subsidiaries may be a drag on some other companies, not so for HDFC. They are performing well and adding value significantly.

HDFC Investors will continue to reap rich rewards in future - looking at how it is raising its capital requirements and expanding its loan Book.The portions underlined are especially important for looking at the future of HDFC (FY11 and so on)



Now, read on - what the HDFC Board approves and proposes :
 



FINANCIAL RESULTS

Financials for the year ended March 31, 2010
 
For the year ended March 31, 2010, HDFC’s profit before tax stood at Rs. 3,915.99 crores as compared to Rs. 3,219.04 crores for the previous year – an increase of 22%. After providing Rs. 1,089.50 crores for taxes, the profit after tax for the year ended March 31, 2010 increased by 24% to Rs. 2,826.49 crores as compared with Rs. 2,282.54 crores in the previous year.

The Board of Directors recommend payment of dividend for the year ended March 31, 2010 of Rs. 36 per equity share as against Rs. 30 per equity share in the previous year.

Financials for the quarter ended March 31, 2010

For the quarter ended March 31, 2010, HDFC’s profit before tax stood at Rs. 1,265.88 crores as against Rs. 1,027.62 crores in the corresponding quarter of the previous year – an increase of 23%. After providing Rs. 339.50 crores for taxes, the profit after tax for the quarter ended March 31, 2010 increased by 26% to Rs. 926.38 crores as against Rs. 733.37 crores in the corresponding quarter last year.

**SUB-DIVISION OF SHARES**

With the objective of increasing retail participation in the equity shares of the Corporation and considering the requests received from several individual shareholders, the Board approved a proposal to sub-divide the face value of the equity shares of the Corporation from Rs. 10 per share to Rs. 2 per share. The proposal is subject to the approval of shareholders.

TOTAL ASSETS

During the year, total assets of the Corporation increased to Rs. 1,11,763 crores compared with Rs. 96,994 crores in the previous year, an increase of 15%.

Loan Book

As at March 31, 2010, the loan book stood at Rs. 97,967 crores as against Rs. 85,198 crores in the previous year – an increase of 15%. During the year, the Corporation sold loans amounting to Rs. 5,755 crores. Together with these loans, the growth in the loan book would have been higher at 22%.
The spread on loans over the cost of borrowings for the year stood at 2.31% as against 2.21% in the previous year.

Investments

As at March 31, 2010, the unrealised gains on HDFC’s listed investments amounted to Rs. 16,668 crores (previous year Rs. 10,236). This excludes the appreciation in the value of the unlisted investments.

LENDING OPERATIONS

Approvals and Disbursements

Loan approvals during the year were Rs. 60,611 crores as compared to Rs. 49,166 crores in the previous year, representing a growth of 23%. Loan disbursements during the year were Rs. 50,413 crores as against Rs. 39,650 crores in the previous year, representing a growth of 27%.
During the year, individual loan approvals and disbursements grew by 53% and 31% respectively.
Cumulative loan approvals and disbursements as at March 31, 2010 were Rs. 2,98,061 crores and Rs. 2,42,219 crores respectively.

Non-Performing Loans

Despite the financial turbulence during part of the year under review, the recovery performance of the Corporation continued to be very good. Gross non-performing loans as at March 31, 2010 amounted to Rs. 782.85 crores. This is equivalent to 0.79% of the portfolio (as against 0.81% in the previous year) comprising loans as well as debentures issued by corporates and corporate deposits placed for financing their real estate projects. This is the twenty-first consecutive quarter end at which the non-performing loans have been lower than the corresponding quarter in the previous year.
Based on a six months overdue basis, the non-performing loans as at March 31, 2010 stood at 0.53% of the loan portfolio as against 0.56% in the previous year.
In terms of the prudential norms as stipulated by NHB, the Corporation is required to carry a provision of Rs. 325.29 crores in respect of non-performing assets and general provision on outstanding standard non-housing loans.
The balance in the provision for contingencies account as at March 31, 2010 stood at Rs. 655.57 crores, which is equivalent to 0.66% of the portfolio. The Corporation’s net non-performing loans stood at 0.13%.

RESOURCES

As at March 31, 2010, outstanding deposits stood at Rs. 23,081 crores as against Rs. 19,375 crores on the corresponding date last year, registering a growth of 19%. During the year, deposits accounted for 29% of the incremental borrowing of the Corporation. CRISIL and ICRA have for the fifteenth consecutive year reaffirmed "AAA" rating for HDFC’s deposits.
During the year, loans drawn from commercial banks, financial institutions and the National Housing Bank amounted to Rs. 27,633 crores.
During the year, HDFC availed foreign currency loans of USD 175 million under the Short-term Foreign Currency Borrowings by Housing Finance Companies for a period of three years.
HDFC raised Rs. 7,400 crores through private placement of non-convertible debentures (NCDs) during the year under review. The NCDs were "AAA" rated by both CRISIL and ICRA. During the year, HDFC also raised Rs. 4,301 crores through the first ever issue of Warrants simultaneously with NCDs to Qualified Institutional Buyers on a Qualified Institutions Placement basis and Rs. 500 crores through the issue of long-term Unsecured Redeemable Non-Convertible Subordinated Debentures.

CAPITAL ADEQUACY RATIO

HDFC’s capital adequacy ratio stood at 14.6% of the risk weighted assets, as against the minimum requirement of 12%. Tier 1 capital adequacy was 12.8% against a minimum requirement of 6%.

COST INCOME RATIO

For the year ended March 31, 2010, the cost to income ratio stood at 7.9% as compared to 8.8% in the previous year.

REVIEW OF KEY SUBSIDIARY COMPANIES
HDFC Standard Life Insurance Company Limited (HDFC-SL)

Gross premium income of HDFC-SL for the year ended March 31, 2010 stood at Rs. 7,005 crores as compared to Rs. 5,565 crores in the previous year a growth of 26%. The sum assured inforce for the current year was Rs. 72,610 crores as compared to Rs. 57,158 crores in the previous year.

HDFC Asset Management Company Limited (HDFC-AMC)
As at March 31, 2010, HDFC-AMC managed 33 debt and equity oriented schemes of HDFC Mutual Fund. During the year, the average assets under management was Rs. 1,00,898 crores (which is inclusive of average assets under discretionary portfolio management/advisory services).
For the year ended March 31, 2010, HDFC-AMC reported a profit after tax of Rs. 208.37 crores as against Rs. 129.11 crores in the previous year.

HDFC ERGO General Insurance Company Limited (HDFC-ERGO)
HDFC-ERGO offers a complete range of insurance products like motor, health, travel, home and personal accident in retail segment and customised products like property, marine and liability insurance in the corporate segment.
HDFC-ERGO recorded a growth of 168% during the year, with a Gross Written Premium (including cessions from the motor pool) of Rs. 1,004 crores as against Rs. 374 crores in the previous year.

DISTRIBUTION NETWORK
 
HDFC’s distribution network spans 279 outlets which include 65 offices of HDFC’s distribution company, HDFC Sales Private Limited (HSPL). In addition, HDFC covers over 90 locations through its outreach programmes. Distribution channels form an integral part of the distribution network with home loans being distributed through HSPL, HDFC Bank Limited and a few third party direct selling associates.
To cater to non-resident Indians, HDFC has an office in London, Dubai and Singapore and service associates in Kuwait, Oman, Qatar, Sharjah, Abu Dhabi, Al Khobar, Jeddah and Riyadh in Saudi Arabia.

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