During Monday's frenzied trading on the Mumbai Stock Exchange (BSE), the HDFC scrip opened higher at Rs 300 and soon was at the upper circuit at Rs 308.85. The scrip closed at the upper circuit level against its previous close of Rs 286.

The nominal value of HDFC shares have been subdivided from Rs 100 per share to Rs 10 per share in the current year. The corporation's capital adequacy ratio as at March 31, 1999 was 16.2 per cent, comprising entirely of tier-I capital. "The continuing good performance of the corporation, satisfactory accretion to reserves and a comfortable capital adequacy position has led to exploring new avenues for rewarding shareholders and enhancing shareholder value," the HDFC release said.

Approvals and disbursements during the nine-month period ended December 31, 1999, have recorded a growth of 27 per cent and 30 per cent, respectively, over the corresponding period of the previous fiscal. Emphasising the growth in the retail segment, the HDFC release said approvals and disbursements in respect of individual loans were higher by 41 per cent and 40 per cent, respectively, compared with the corresponding period last year.

INSIGHT
a sensible move

The 100 per cent millennium dividend from HDFC is a sensible thing to do under the present circumstances. First, the company has a huge surplus of funds; as on the last balance sheet date it had a cash balance of Rs 562 crore; and an annual free cash generation of Rs 414 crore, most of which went into equity and preference shares. On an average, its return from a Rs 1,100 crore equity and preference portfolio has yielded a return of less than 9 per cent. Secondly, it has a return on net hworth of just 17 per cent, implying a scope for returning funds to the shareholders. Finally, it has a large networth of Rs 2,000 crore which is not fully leveraged, indicating some slackness in its need for funds.

Aaron Chaze