HUDCO’s Q1 net profit takes a hit

Shares of Housing and Urban Development Corporation (HUDCO) eased half a per cent today, a day after the mortgage lender reported 39% fall in consolidated net profit during fiscal first quarter to June 30, primarily owing to elevated provision cost.
Consolidated profit after tax (PAT) stood at Rs 203.38 crore during the quarter under review as compared to Rs 335.6 crore it reported in Q1FY20.
Total Income declined by 1.9% yoy to Rs 1,781.79 crore in Q1FY21 from Rs 1,816.19 crore in Q1FY20. Net interest income (NII) stood at Rs 575.13 crore in Q1FY21 which witnessed a decline of 3.7% yoy, as against Rs 597 crore it reported in Q1FY20. Operating profit for Q1FY21 stood at Rs 270.88 crore which  decreased by 47.4% yoy as against Rs 515.34 crore in Q1FY20.              
Impairment on financial instrument increased to Rs 297.06 crore in Q1FY21, as against Rs 5.12 crore in Q1FY20. The company has made provision on loans (impairment) as per Expected Credit Loss (ECL) method amounting to Rs 3,186.73 crore as on June 30, 2020.              
HUDCO reports a subdued set of numbers owing to elevated provision. AUM grew 3%/5% YoY and QoQ, HOwever NII declined by 4%/17% YoY/QoQ. Which led to compression NIM by 29bps YoY to 2.96%. The yield on advance declined by 70bps and the Cost of funds reduced by 31bps which impacted NIM for the Quarter. Pre Provision dropped by 3% YoY, owing to subdued NII.
GNPA sequentially remained stable and it has 86% provision coverage which is higher compared to peers and considering 96% loan outstanding is to the government agency.
HUDCO currently trades at 0.56x of TTM net worth, which is lower compared to the historical average. The stock price to consolidate until a clear picture emerges about asset quality in Q2 and Q3FY21.

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