Housing Development Finance Corp. (HDFC) declared a standalone net profit of Rs 3,780 crore for the quarter ended September 30, 2021, on Monday (Q2FY22). This represents a 32% increase over the same period last year, when dividend income was Rs 2,870 crore.
On the NSE, HDFC shares were up about 2% at Rs 2,900 apiece in mid-afternoon trade. Dividend income for the September quarter totalled Rs 1,171 crore, a staggering 263 percent increase over the same period the previous year.
Chief Executive Officer Keki Mistry said in a post-earnings call that the financier earned dividend income from holdings in its subsidiaries HDFC Bank, HDFC Life Insurance, and HDFC Asset Management Company. In the second quarter, the company’s revenue from operations increased by 4% to Rs 12,216 crore, compared to the same quarter last year.
Further Key Takeaways
The rising rate of pandemic vaccines in India, combined with an improving labour environment, is driving consumer demand and assisting lenders in improving their retail portfolio. Despite an increase in demand for house loans, HDFC’s interest income fell by 2.3 percent year over year.
The Board has also approved the issuing of secured redeemable non-convertible debentures in various tranches totalling Rs 75,000 crore on a private placement basis. The NII for the first half of the financial year was Rs 8,255 crore, up from Rs 7,039 crore the previous year, a 17 percent increase.
Individual approvals and disbursements increased by 67 percent and 80 percent, respectively, in the half-year ending September 30, 2021, compared to the same period the previous year.
In the second quarter, the company’s net interest margin was 3.6 percent
“The demand for house loans is still very robust. Home loan growth was evident in both the inexpensive housing segment and the high-end houses. The housing sector is looking up, thanks to rising sales and new project launches,” HDFC stated in a filing.
Individual disbursements in October were at an all-time high for a non-quarter-end month. The provisions were Rs 13,340 crore at the end of the September quarter, with the provisions carried as a percentage of the exposure at default (EAD) being 2.56 percent.
HDFC’s capital adequacy ratio was 22.4 percent, with Tier I capital accounting for 21.6 percent and Tier II capital accounting for 0.8 percent. The minimum capital adequacy ratio and Tier I capital requirements, according to regulatory guidelines, are 15% and 10%, respectively.
Frequently Asked Questions (FAQs)
Q1. What motivates firms to pay dividends?
Companies distribute dividends from their profits to their shareholders as an appreciation for providing them with the capital they need to operate. It is up to the board of directors to decide how much of the company’s earnings should be paid out in dividends and how much should be kept in the business.
Q2. Is income from dividends taxable?
Dividend income from equities held as investments is taxable under the head of ‘Other Income’ at the applicable tax slab for resident shareholders, regardless of the amount received. The dividend is classified as ‘Business Income’ and taxed appropriately if the equities are retained for trading purposes.