Revival of housing finance biz deepens NBFC coffers

A revival of the housing finance business has reflected on the performance of NBFCs in the second quarter of this fiscal in terms of a surge in profits. Of the 258 NBFCs selected for an FE study, roughly half was found to have increased their efficiency during the second quarter.

The study traces the trend of return on total income for 258 NBFCs during July-September, 2010, as compared to July-September, 2009, and July-September, 2008. The study showed that there was a marked rise in return on total imcome in Q2 this year.

Aggregate total income of 258 NBFCs has increased by 17.9% to Rs 10,017 crore during July-September, 2009, from the level of Rs 8,494 crore during July-September, 2008, and further increased by 22.9% to Rs 12,312 crore during July-September, 2010.

The interest expense of these NBFCs increased by 17.2% to Rs 5,639 crore during July-September, 2009, from Rs 4,810 crore during July-September, 2008, and increased further by 16.3% to Rs 6,559 crore during July-September, 2010.

But their combined net profits have increased by 36.4% to Rs 2,532 crore during July-September, 2009, from the level of Rs 1,856 crore during July-September, 2008, and increased further by 25.8% to Rs 3,184 crore during July-September, 2010, resulting in a sharp increase in return on total income higher from 21.85% to 25.86%.

Interest income helped NBFCs to increase the profitability. Total income of LIC Housing Finance registered a growth of 32% y-o-y, rising to Rs 1,107 crore during Q2FY11 compared to Rs 839 crores in Q2FY10, with contributions from all the major businesses in the company.

The operating profit of the selected NBFCs steadily increased from Rs 7,466 crore during July-September, 2008, to Rs 11,013 crore during July-September, 2010.

Of these 258 NBFCs, nearly 24% of companies showed an increase of more than 100% in total income during July-September, 2010.

Mention may be made of Manappuram General Finance, GSB Finance, SE Investments, Subhkam Capital, Intec Capital and Williamson Finance.

The total income of Manappuram General Finance increased by 130.2% to Rs 86.97 crore during July-September, 2009, and increased further by 180.3% to Rs 243.79 crore during July-September, 2010.

Among the selected NBFCs, Dewan Housing has witnessed a significant increase in PAT to total income ratio. Net profit to total income ratio for the current quarter was 25.52% as against 15.24% in the corresponding quarter of the previous year.

Commenting on the performance, Kapil Wadhawan, Chairman & managing director, DHFC, said, ?DHFL has recorded a robust business growth for the second quarter including a healthy loan portfolio and net profit growth.Our strong credit appraisal skills that have evolved over 26 years continue to ensure that the collection efficiency & NPA’s remain under check.?

HDFC, the largest NBFC also registered an increase in return on total income to 27.19% during the second quarter. Total income of HDFC increased to Rs 2,970 crore at September 30, 2010 from Rs 2,620 crore at September 30, 2008.

A significant improvement in net profit in July-September, 2010, was noticed in the case of Bajaj Fin, SREI Infra Fin and SE Investment.

Buoyed by a strong volume growth in consumer and SME business line, the net profit of Bajaj Fin increased by 143.3% to Rs 52.77 crore during July-September, 2010, from the level of Rs 21.69 crore during July-September, 2009.

On the other hand a significant fall in total income was observed in the case of SMC Global Securities, First Leasing , Lohia Securities, Blue Chip India ,Wall Street Fin and SMIFS Cap Market.

The top five NBFCs in terms of total income during July-September, 2010, were HDFC, Power Finance Corp, Rural Elec Corp, LIC Housing Finance and IFCI. For these NBFCs, PAT to total income ranged between 21% and 30% during July-September, 2010.