HDFC net up 21%; to raise Rs 4k crore

MUMBAI: Housing Development Finance Corporation on Wednesday unveiled plans to raise Rs 4,000 crore by placing debentures with institutions, as

it announced a 21% rise in first quarter profits and spoke about a resurgence in housing demand.

Shareholders of India’s top mortgage lender approved the qualified institutional placement (QIP) of non-convertible debentures with warrants, which allow its holders to buy shares in the future, at the firm’s annual meeting.

HDFC chairman Deepak Parekh said that the strike price for the warrants would be at a premium to present market levels.

Mr Parekh, who has run HDFC for nearly three decades and is set to become non-executive chairman after relinquishing executive duties at the end of 2009, told shareholders that there would not be any bonus issues until 2012-13 — making it 10 years after the last bonus issue.

However, he assured shareholders that the company would consider preferential allotment of shares in HDFC Standard Life to HDFC shareholders whenever the insurance firm chose to go public.

HDFC reported a net profit of Rs 564.92 cr for the quarter to end- June, up from Rs 468 in the year earlier period. Although profits improved, HDFC’s net interest margins declined slightly, falling to 2.19% for the quarter from 2.21% in FY09 and 2.32% the year before.

Mr Parekh said that margins in the earlier years were flattered by cheaper cost of funds thanks to the preferential allotment of shares to Carlyle and Citigroup, which raised Rs 3114cr raised in May 2007.

The HDFC chief also said that there was a resurgence in demand for housing, which was preventing property rates from falling while increasing loan growth.

HDFC approved loans worth Rs 12,259 cr during the quarter, up 23% year-on-year, while disbursals grew 21% to Rs 8,688 cr. Compared with the preceding quarter – the last quarter of the previous fiscal year – HDFC’s loan approvals and disbursements grew 45% and 19% respectively.

Responding to a query on outlook for interest rates Mr Parekh said “With the increased government borrowing, going forward everyone expects interest rates to rise. But for the the present there is ample liquidity and interest rates are soft” said Parekh.

Shares in HDFC closed 4.43% down at Rs 2,410.30 on Wednesday amid concerns of the expected equity dilution as a result of its proposed fund raising.

One analyst at a private bank, who did not wish to be named, said that there were concerns that the Rs 4,000cr QIP issue which could expand the com-pany’s equity base by 3.5% would put further pressure on margins. “The money will be used to buy shares of HDFC Bank, which will not earn as much income as say lending for home loans.”