HDFC recovered today on sustained buying support on the back of the Credit Policy for 2003-04, which is seen to be favourable for housing finance companies.
By 12:10 IST, the scrip of the housing finance major was up by 3.81% at Rs 342 on the BSE, after recovering from a low of Rs 327.30. A volume of 76,742 shares was recorded on the counter. In the last three sessions, the scrip rose by 16% from Rs 295 on 25 April 2003. Earlier, between 11 and 25 April 2003, the scrip, in eight sessions, lost 14.5% from Rs 344.95.
The major trigger for stocks in the housing finance sector came from the Reserve Bank of India's Credit Policy for the year 2003-04, which cut bank rate by 25 basis points to 6% and the cash reserve ratio (CRR) by 25 basis points to 4.50% from 4.75% (effective 14 June 2003). The repo rates were left unchanged.
HDFC spurted on sustained buying support as the bank rate cut may lead to a cut in the housing finance rates, which will spur the demand for housing loans. Interest rates on housing finance loans have plunged to 9-10% as of now from 13-14% about two years ago and from a level of as much as 18% a few years ago. The Credit Policy also announced that housing loans up to 10 lakh in rural and semi-urban areas will now get priority sector status.
The rise in the HDFC scrip is also attributed to reports that International Finance Corporation (IFC), a private sector funding arm of the World Bank, has approved a $ 200-million loan to the company. The loan is dollar-denominated.
HDFC is awaiting the government approval before it avails of the loan. IFC has offered to provide two separate long-term loans - one loan amounting to $100-150 million for a period of eight years and the other, for $50-100 million for a tenure of six years.
The loans will go a long way in propping up HDFC's re-vitalised focus on the middle and lower income segment with attractive housing schemes. HDFC, the largest provider of housing loans in the country, has been hard-pressed by growing and aggressive competition from other home loan financers like ICICI Bank and State Bank of India.
However, analysts still feel that the competition in the housing finance sector is a major concern. The slow growth in HDFC's earnings was attributed to the sluggish economy and the increasing competition from players like ICICI Bank, State Bank of India and LIC Housing Finance.
For the third quarter ended 31 December 2002, HDFC registered a 21% rise in net profit to Rs 146.65 crore (Rs 121.01 crore) on a 11% increase in total income to Rs 740.13 crore (Rs 666.28 crore).
As on 31 March 2003, institutions and the public held 59.70% and 15.52% stake in HDFC respectively.