Share price of HDFC surged 4% on better asset quality

The shares of Housing Development Finance Corporation (HDFC) on Tuesday sprung by 4 percent at Rs 2,116 on the Bombay Stock Exchange (BSE).

The shares of Housing Development Finance Corporation (HDFC) on Tuesday sprung by 4 percent at Rs 2,116 on the Bombay Stock Exchange (BSE). Thus, facilitated 10 percent gain within the past two days after the corporation reported that the September quarter (Q2FY21) numbers were soaring higher than the estimated amount due to improvement in asset quality and steady assets under management (AUM) growth.

The stocks of the housing finance company had been trading at its highest level since March 13, 2020, and during the past month, it had outperformed the market by gaining a whopping 18 percent, as compared to only a 3.7 percent rise in the S&P BSE Sensex.

The net interest income (NII) sprung by 21 per cent in Q2 to Rs 3,647 crore from Rs 3,021 crore in the past year. The assets under management (AUM) soared by 10.2 per cent to Rs 5.40 trillion in Q2FY20 from Rs 4.90 trillion just a year ago. Individual loans consist of 75 per cent of the AUM.

Asset quality improved as the gross non-performing assets (GNPA) improved by 6 basis points quarter on quarter to 1.81 percent. GNPL improved by 4 basis points and was adjusted for the Supreme Court (SC) order on asset quality classification. In the individual lending book, the overall collection efficiency (CE) was at 96.3 percent, while that of the non-moratorium book was at 99.5 percent.

With the opening up of the Indian economy, traction in individual loans has gained speed with successive monthly improvements. The existing low-interest rates, softer property prices, reduction in stamp duty in certain states and inherent strong demand for home loans are proving favourably well for the housing finance sector, the management stated with September and October witnessing the strongest recovery since the outbreak of the pandemic.

“Q2FY21 was a strong quarter on all fronts. Disbursements have been picking up month on month and have crossed YoY levels over the past two months. With the declining cost of funds and reduction of excess liquidity on the balance sheet, margins should be stable despite pressure on retail lending yields. CE data is encouraging. We believe the company has made more-than-enough provisions for any potential asset quality slippages for the next two quarters,” Motilal Oswal Securities emphasised in a result update.

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