HDFC Q4 net seen up 34%

[Naresh kumar . D]

HDFC Q4 net seen up 34%; exceptional gain to help

MUMBAI - Housing Development Finance Corp Ltd's net profit for Jan-
Mar
is expected to rise 34% year-on-year to 7.34 bln rupees and operating
income is likely to grow 32% to 22.77 bln rupees, according to an
estimate of
three brokerages.
Quarter-on-quarter, HDFC is expected to register a rise in net
profit by 13%
and post operating income growth of 6%.
The housing loan major's bottomline is expected to grow robustly
on the
back of extraordinary gains and good credit growth.
"Over the year, HDFC has built strong subsidiaries in key
strategic
financial areas like mutual funds, insurance, and banking. These
subsidiaries
will give considerable growth and contribute to overall market
capitalisation
of HDFC," said Abhijit Majumder, banking analyst, Prabhudas Lilladher.
HDFC does a lot of value unlocking in its subsidiaries frequently,
which adds to the extraordinary gains, said an analyst at another
domestic
brokerage firm.
"The total value of HDFC, including its subsidiaries, is around
910 bln
rupees, while the mortgage business on a standalone basis is valued at
600
bln rupees," said Majumder.
HDFC may book a profit of 2.35 bln rupees from its 26% stake sale
in HDFC
General Insurance to Germany's Ergo.
HDFC will announce its Jan-Mar result on Wednesday.
.
CREDIT GROWTH
HDFC Chairman Deepak Parekh recently said the credit growth is
expected
around 25% year-on-year in 2007-08.
Though the largest housing loan lender--ICICI Bank--has seen a
sharp
slowdown in its loan disbursement, HDFC has not seen a major slump.
"HDFC's core business has not come under any strain," Majumder
said.
Sharp increase in lending rates has led to a severe slowdown in
the credit
growth of banks.
HDFC cut its existing loan rates by 25 bps during the last quarter
of
2007-08.
"This cut would impact its overall yield by 5 bps quarter-on-
quarter. We
expect spreads to decline 5 bps quarter-on-quarter to 2.25%. However,
the
desired level is 2.1-2.2%," brokerage Motilal Oswal said in a report.
.
FX DERIVATIVES
HDFC has yen-based exposure of $400 mln-$450 mln in the
derivatives market,
Morgan Stanley had said in a report last month.
Morgan Stanley doesn't expect HDFC's net profit to be hit by its
yen
exposure
in the derivatives market.
"HDFC has one yen-denominated loan of $100 mln, which is maturing
over
the next few days. HDFC has frozen a mark-to-market loss of 160 mln
rupees on
this liability and it took this loss in the period ended December.
Hence, there
is no impact on Jan-Mar earnings," Morgan Stanley had said in the
report.
Many Indian companies incurred large derivatives losses in 2007-08
following the unexpected appreciation of the Swiss franc and Japanese
yen
against the U.S. dollar. These companies had entered into foreign
exchange
derivative deals with banks to hedge their currency exposure.
.
STOCK VALUATION
Most brokerages have given a 'buy' recommendation to the HDFC
stock.
"We maintain 'outperformer' on HDFC," Prabhudas Lilladher's
Majumder said.
The price-to-book value of HDFC for 2009-10, excluding the
subsidiaries,
is 2.4 times, Majumder said.
"Adjusting for the value of its investments, the stock is
available at
17.9 times FY10 expected earnings per share. We are optimistic about
HDFC's
future earnings prospects and value unlocking through its other
business
ventures," brokerage Motilal Oswal said.
Today, HDFC shares ended at 2,594.50 rupees on National Stock
Exchange
today, up 1.21% from Wednesday.
.
HDFC BANK STAKE
HDFC subscribed to the 26.2-mln-share issue by HDFC Bank, so that
the
promoter stake was maintained at 23.2% in the bank after the merger of
Centurion Bank of Punjab.
HDFC infused 40 bln rupees to maintain its stake in HDFC Bank,
which had
slipped to 19.0% after Centurion Bank of Punjab merged with the
latter. End
.