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HDFC Q3 net seen up 20-22% on retail ops

India's biggest home mortgage lender, Housing Development Finance Corporation, is expected to report its net profit rose 20-22 per cent in October-December, driven by expanded retail lending.

Home loan lending is likely to have increased a hefty 40 per cent, reflecting new tax concessions and weak property prices, and far surpassing the growth in corporate lending.

Manish Karwa, a banking analyst at Pranav Securities, said he expects overall lending to have increased 25 per cent. "But as interest margins have remained steady with costs static, net profit should rise 20 per cent."

HDFC is expected to post a net profit of Rs 1.14-1.16 billion for the October-December quarter, up from Rs 951.6 million a year earlier.

The company, which recently diversified into the software services business through a tie up with Tata Consultancy Services, will release its third-quarter results on Thursday.

Analysts say that demand for home loans increased after the government raised the tax deduction for interest paid on housing loans to Rs 100,000 from Rs 75,000 in the past year.

A drop in property prices in the past two years also fuelled growth in home loan demand from individual borrowers. And analysts expect demand for housing loans to remain strong in the next few years as property prices continue to slide from the lofty levels reached during the 1993-94 property market bubble.

Little downside for stock

Still HDFC shares, a favourite among foreign funds because of its strong financial standing and low level of loan defaults, are expected to trade in narrow range of Rs 530-570 in the near term, analysts said.

"I have a 'hold' rating on the stock. It has always been an outperformer in a falling market as seen last year," an analyst at a foreign brokerage house said.

The stock rose 89 per cent in calendar 2000, while the Sensex fell 20 per cent.

Karwa of Pranav Securities also said he saw little downside for the stock, but said the outlook was likely to be driven by the performance of HDFC's non-core businesses.

The lender, which is steadily turning into a one-stop universal bank, has in the past year made forays into life insurance, set up an asset management company and a credit information bureau. It also owns HDFC Bank, India's second-largest private sector bank.

On Wednesday, HDFC's shares fell Rs 5.35 or 1.0 per cent to Rs 531.85.

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