HDFC: At home

Anup Menon

THE fixed deposit programme of Housing Development and Finance Corporation (HDFC) offers attractive rates compared to other companies with a similar risk profile.

The company's gearing levels and the ability to cover interest payments have been improving over the last few years. Given that the fundamentals of the housing industry are picking up and there is the possibility of the company diversifying into other services such as insurance, the outlook appears fairly bright. In this backdrop, HDFC is not likely to face any problems in servicing its fixed deposit base. Fresh investments may be considered in all the tenors on offer with the exception of the five year.

HDFC offers two fixed deposit schemes with tenors of one, two, three and five years respectively. The monthly income plan offers rates of 9 per cent, 9.5 per cent, 9.75 per cent and 10 per cent, and the non-cumulative and cumulative plans 9 per cent, 9.5 per cent, 10 per cent and 10.25 per cent. The investor is eligible to claim tax benefits under Section 80-L of the Income-Tax Act. Deposits are accepted at the company's office located at II floor, ITC Centre, 760, Anna Salai, Chennai-600 002, among others.

HDFC is the market leader in the housing finance segment. For the year-ended March 1999, it managed a 25 per cent growth in approvals (Rs. 4,071.76 crores) and disbursals (Rs. 3,251.27 crores).

The demand for housing has been encouraging. HDFC provides loans to individuals, corporations and builders for construction of houses. In the recent past, real-estate prices have been moving up steadily, improving the asset quality of the firm and reducing its financial risk profile.

The thrust for housing given in the last two Budgets is likely to have a positive impact on the company. The main challenge before it would be the ability to maintain its asset quality and increase its reach. There is a strong possibility of the company soon entering the insurance sector. In this venture, the company's retail networking ability should work favourably. Given these factors, the pressure on the cash flows may be marginal.

HDFC's financial performance in the first three quarters of 1999-2000 was impressive. Operating income rose 12.42 per cent to Rs. 1,442.35 crores compared to the corresponding previous period. Operating margins remained steady at 24 per cent. Post-tax earnings grew 19 per cent to Rs. 267.84 crores. HDFC can be a good place to park at least a part of the funds earmarked for fixed-income investments.