Gruh Finance

HDFC’s 59.15% subsidiary Gruh Finance had brought in a lot of cheer with a 1:1 bonus and Rs.3/share dividend. Thus quarter, there aren’t such joys but the financial numbers for Q1FY15 are good enough. It posted a 29% (YoY0 rise in NII at Rs.87 crore and this helped the company end the quarter with a 23% rise in net profit at Rs.42 crore. Expenses were up – at 74% of income earned v/s 63% in previous Q1. Yet the strong NII saw it though, despite the Deferred Tax liability on Special Reserve at Rs.4 crore. Though provision has increased to Rs.12 crore compared to Rs.10 crore in Q1FY14 and Rs.74 lakh in Q4.

Asset quality improved on yearly basis. The company has stated that, "Gross non-performing assets (NPAs) were Rs 32.48 percent (0.44 percent of loan assets) as against Rs 26.30 crore (0.46 percent) and net NPAs were 0.04 percent of loan assets as against 0.05 percent of loan assets in June 2013." Loan assets increased from Rs 5,727 crore to Rs 7,378 crore in June quarter.

The company was originally known as Gujarat Rural Housing Finance Corporation and was set up by H T Parekh, founder of HDFC and uncle of Deepak Parekh. It was set up to provide loans to the economically weaker in the society. Financing homes in rural areas with a population of around 50,000 accounts for 48% of Gruh’s business while rest comes from financing homes in urban towns. This is one sector, low-income financing which is seeing intense competition but Gruh is much ahead of the race and like HDFC has carved a name for itself. With the current sops given in the Budget for affordable housing, competition for companies like Gruh and LIC Housing, from now banks is a new challenge.