HDFC profit drops as virus provision surges

Lender piles up ₹30,000-crore cash chest: 26% loans under moratorium

Mortgage lender HDFC reported a 22% drop in its net profit to ₹2,233 crore compared with the ₹2,862 crore in the same quarter of the previous financial year.

The drop in profit is mainly due to higher provisioning for COVID-19 pandemic, lower dividend income and a lower profit from sale of investments.

Dividend received in Q4FY20 was ₹2 crore compared with ₹537 crore.

“With the dividend distribution tax being abolished, some of the subsidiary companies of the Corporation did not pay interim dividend,” HDFC said. Profit on investment was only ₹2 crore (₹321 crore).

The lender made a special provision of ₹1,274 crore during the quarter, including COVID-related provisions, compared with the ₹398 crore of the year-earlier period.

“Given the external investment, we have kept a huge amount of liquidity on our balance sheet. We have been slowly building up the level of liquidity. Against a liquidity of ₹6,000 crore last year, this year we are carrying ₹30,000 crore. This excess liquidity gives us a negative carry in the P&L account,” said Keki Mistry, vice-chairman and CEO, HFDC.

Total individual loan approvals grew 14% in volume terms and 12% in value terms while disbursements rose 7%. The average size of individual loans stood at ₹27 lakh. “Till March 15 [FY20], we had a very robust growth. Then, because of the lockdown and COVID-related issues, the second half of the month, which is typically the time when growth is normally the highest, we had a very tepid growth and hardly did any disbursement. The 14% growth on AUM basis for the individual loans have to be considered in that light. The growth would have been higher if that had not happened,” he said.

The gross non-performing loans as at March 31, 2020 stood at ₹8,908 crore, or 1.99% of the loan portfolio. The non-performing loans of the individual portfolio stood at 0.95% and that of the non-individual portfolio at 4.71%.

Mr. Mistry said there was an increase in bad loans compared with the October-December quarter.

“Over 95% of our borrowers pay money electronically.[For] a little over 4% of our borrowers, we have to physically contact, speak to them and collect money. Because of the lockdown in the second half of March, it was not possible to do that. Therefore, individual NPAs increased. Once normalcy returns, we will get back to the levels which we used to see,” he said.

“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,” HFDC said.