Gruh Finance

HDFC’s 59.15% subsidiary Gruh Finance posted good numbers for Q2FY15. Total income rose 2% (YoY) at Rs.258 crore and it ended the quarter with a net profit at Rs.43 crore, up 26%. Operating costs per se have risen 19% but as a percentage of revenue earned, it has come down from 76% to 74%. PBT was at Rs.67 crore, up 31%. Deferred Tax liability on Special Reserve was at Rs.5 crore.

Asset quality has improved. Gross non-performing assets (NPAs) were Rs 30.40 percent (0.38% of loan assets) as against Rs 24.93 crore (0.461%) and net NPAs which had come down to 0.04% in Q1, now stands at nil. Loan assets increased from Rs 6143 crore to Rs 7,910 crore, up 29%.

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 new banks is a new challenge.