The Hindu Business Line : HDFC: Housed in strong fundamentals

THE fixed deposit programme of Housing Development Finance Corporation (HDFC) is open for investment. The company's fundamentals are strong. Also, the depositors have an added incentive, as the interest income on deposits in HDFC is eligible for tax deduction (under Section 80L). The interest offered is lower than that of housing finance companies such as Sundaram Home Finance, but is 50-75 basis points higher than that of bank deposits. Hence, an investment up to three years can be considered, but avoided beyond that as the incremental returns are not large enough.

Schemes and features: An investor can opt for the cumulative or the non-cumulative scheme. Under the latter, the company offers monthly, quarterly, half-yearly and annual income plans (see table for interest rates and minimum deposits). The interest for the cumulative scheme is compounded annually. The yields are 6.25 per cent, 6.71 per cent and 7.21 per cent for one, two and three years respectively. Further details can be had from HDFC's registered office at Ramon House, HT Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai 400 020.

Business prospects: One of the major players, HDFC has a strong presence in the housing finance Industry. It provides loans for the purchase or construction of residential houses. Given the stable demand for housing on the back of low interest rate regime, tax incentives and increased income levels, the company has good prospects for growth as far as loans go. But this may not necessarily lead to a growth in earnings due to pressures on profitability from increasing competition.

Financials: For the quarter ended June 2003, the company's disbursements grew 30 per cent to Rs 2,091.8 crore from the corresponding previous period. The income from operations grew by a modest 3.3 per cent to Rs 725.9 crore.

Net profit was at Rs 37.4 crore (Rs 28.5 crore). The company's capital adequacy ratio stands at 14.3 per cent, higher than the stipulated norm of 12 per cent. Non-performing loans stood at 1.2 per cent of the total loan portfolio.

Suitability: Investors with a portfolio of FD investments, interested in diversifying their risk, can consider this option. Senior citizens can opt for this as they are offered an additional 0.50 per cent. The monthly income plan can also be considered.

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