HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED

Transcription

1 July 2013 HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED Analytical Contact: Karthik Srinivasan Viral Shah Richa Tripathi Relationship Contact: L. Shiva Kumar Website Rating ICRA has assigned [ICRA]AAA rating to the Fresh NCD issue of Rs crs and reaffirmed the issuer rating of IrAAA (pronounced issuer triple A), [ICRA]AAA (pronounced ICRA triple A) rating to the outstanding Non-Convertible Debentures and Subordinated Debt Programmes, MAAA (pronounced M triple A) rating to the fixed deposit programme and [ICRA]A1+ (pronounced ICRA A one plus) rating to short- term debt programme of Housing Development Finance Corporation Limited (HDFC) 1. The outlook remains stable on all the long term ratings and Issuer Rating. Key Financial Indicators Rs in Crores Mar-13 Mar-12 Mar-11 Equity Capital Net Worth 25,000 19,018 17,317 Total Loans (net of loans sold) 1,70,046 1,40,875 1,71,127 Total Assets 194, , ,502 Net Interest Income 6,179 5,212 4,465 Fee Based & other Income 1, Net Income 7,205 6,176 5,158 Profit Before Tax (PBT) 6,573 5,666 4,867 Profit After Tax (PAT) 4,848 4,123 3,535 Interest income / Avg. Total Assets 11.09% 10.70% 9.42% Cost of average interest bearing funds 9.04% 8.56% 7.01% Net Interest Margins/ Avg. Total Assets 3.42% 3.41% 3.50% Gain on securitization and trading profits / Avg. Total Assets 0.17% 0.18% 0.28% Expenses/ Avg. Total Assets 0.44% 0.46% 0.45% Provisions & Charge offs / Avg. Total Assets 0.08% 0.05% 0.05% PAT / Avg. Total Assets 2.68% 2.70% 2.77% PAT / Average Net worth 22.03% 22.69% 21.74% Cost to Income Ratio 10.68% 10.87% 10.52% Dividend/PAT 46.64% 45.68% 43.41% Total Debt/Net Worth times Capital / Risk weighted Assets 16.35% 14.60% 14.00% 1 For complete rating scale and definitions please refer to ICRA's Website or other ICRA Rating Publications

2 Credit Strengths Demonstrated ability to grow in a competitive mortgage finance market while maintaining healthy interest spreads on the back of a strong franchise Superior asset quality built on a foundation of sound understanding of credit risks associated with mortgage finance, adherence to stringent loan underwriting norms, and efficient monitoring and recovery systems Strong capitalization levels augmented by warrant conversion aids financial flexibility Access to diverse sources of funds, which enables mobilising funds at competitive rates. Superior operating cost structures, which significantly supports profitability Large unrealised gains in investment books, which serve as hidden reserves and can be used to augment capital in case of need. However, any substantial strategic investment may necessitate further equity infusion Strong brand and large customer base Strong and well-experienced management team Credit Challenges Dynamic regulatory environment in light of recent regulatory rulings on floating interest rates, enhanced provisioning requirements and prepayment penalties Protecting margins and ensuring business growth in an extremely competitive environment. To minimise impact of rise in interest rates on asset quality in the individual mortgage loan portfolio. To maintain asset quality in the commercial real estate portfolio, which accounts for around one-third of the balance sheet size Rating Rationale The ratings factor in HDFC s strong franchise with demonstrated ability to grow in a competitive mortgage finance market, consistent profitable operations on the back of strong interest margins and supported by low provisions on account of sound asset quality and robust solvency indicators. The ratings also take into account HDFC s strong capital adequacy, access to diverse sources of funds, comfortable liquidity position and its ability to manage the asset quality in its Non-Individual loan book over the years. ICRA believes that HDFC s focus to grow while maintaining its interest spread, competitive operating cost structure and a tight control on asset quality would benefit the earnings and solvency of HDFC going forward as well. The ratings factor in HDFC s strong franchise with demonstrated ability to grow in a competitive mortgage finance market, consistent profitable operations on the back of strong interest margins and supported by low provisions on account of sound asset quality and robust solvency indicators. The ratings also take into account HDFC s strong capital adequacy, access to diverse sources of funds, comfortable liquidity position and its ability to manage the asset quality in its Non-Individual loan book over the years. ICRA believes that HDFC s focus to grow while maintaining its interest spread, competitive operating cost structure and a tight control on asset quality would benefit the earnings and solvency of HDFC going forward as well. In FY 13, HDFC s credit portfolio witnessed a shift in favour of individual loans. Consequently, Individual loans accounted for 68% of the overall loan book (inclusive of loans sold) as on March 31, 2013 with the remaining 32% comprising of non-individual loans (primarily corporate loans, construction finance loans to builders and lease rental discounting). The gross NPAs of HDFC declined marginally to 0.70% as on March 31, 2013 from to 0.74% as on March 31, 2012 with the gross NPAs in Individual Loan Segment witnessing a marginal increase to 0.58% as on March 31, 2013 (0.55% as on March 31, 2012). The company has been successful in maintaining comfortable asset quality in its Non-Individual Loan book over the years with the Gross NPA% at 0.91% as on March 31, 2013 (1.05% as on March 31, 2012). On the back of excess provisions held by the company in FY13, the Net NPA stood at Nil. HDFC s tight originations as well as its proactive recovery procedures should help it limit slippages and consequently the adverse impact on profitability indictors. ICRA Rating Services Page 2

3 HDFC has a fairly diverse mix of resources to fund its operations. This gives the company flexibility to change its borrowing mix to maintain a competitive cost of funds. In FY 13, in a bid to rationalise the overall cost of funds, the corporation resorted to accelerated borrowing from the debt market whose contribution to the overall borrowing mix increased to 56% in FY13 from 45% in FY12. Consequently, the share of domestic term loans declined sharply to 11% in FY 13 from 28% in FY 12. Going forward, given its financial flexibility, in order to keep the borrowing costs lower, the Corporation may continue their dependence on debt market borrowings at least in the near term. The company in FY13 reported a Total Income of Rs 21,113 crores due to an increase in the Total Interest Income and Dividend Income earned from its subsidiaries & associates. The company reported a PAT of Rs 4,848 crs in FY13 as compared to Rs 4,123 crs in FY12. With HDFC being able to maintain a favourable cost structure in the individual home loan segment, ICRA expects HDFC to grow at moderate pace while maintaining its interest spreads, asset quality and cost efficiency going forward as well. The conversion of warrants gave the Corporation Rs 3,285 crore of additional Tier I capital leading the net worth to stand at Rs 25,000 crore as at March 31, HDFC Ltd as on March 31, 2013, reported a Capital Adequacy Ratio of 16.4% (Tier I at 13.9%). ICRA Rating Services Page 3

4 Summary Credit Perspective Parameters Overall Comments A Business Risk 1 Business Mix HDFC s mortgage portfolio can be classified broadly as individual housing loans (68% of overall loan book in FY 13 as compared to 66% in FY 12) and non-individual loans (32% of the overall loan book in FY 13 as compared to 34% in FY 12). Within the non-individual book s contribution of 32%, construction finance accounts for 12-13%, LRD accounts for 6-7% and ~12-13% by corporate loans. The mix of the loan book portfolio has shifted in favour of the Individual book in FY13 on account of strong traction seen from the Tier II and Tier III cities as well as slowing demand from the builder segment. 2 Management and Systems The company has been in this segment for over 3 decades and has built strong competencies. The senior management team has vast experience in the segment and has remained stable over a period of time. HDFC has strong appraisal, monitoring, collection and risk management systems. 3 Operating Environment The present operating environment is moderate. Property prices continue to remain high however there could be some correction in certain pockets owing to excess supply and liquidity issues being faced by some developers. So far there has not been any significant deterioration in asset quality across housing finance. The legal impediments are not significant. HDFC is covered under SARFAESI Act, which is likely to help it in recovering the dues and minimising the loss on default. B Financial Risk 1 Profitability HDFC reported an increase in PAT of 18% from Rs 4123 crs in FY12 to Rs 4848 crs in FY13 on the back of rise in its Interest and Non-Interest Income. Return on Networth has been good at ~22% in FY13. Cost to income ration remains stable at ~10.68% in FY 13 as compared to 10.87% in FY12 2 Liquidity and Funding Profile Over the past two years, HDFC s borrowing profile is seeing a shift in favour of debt market borrowings on account of persistently high interest rates in the economy ensuring that bank base rates remain elevated and consequently bank borrowings expensive. Liquidity Profile of HDFC is comfortable with a substantial portion of shorter tenor assets vis a vis other HFCs and a diverse borrowing profile. The liquidity profile of HDFC is further supported by HDFC s ability to mobilise funds at short notice at competitive rates. 3 Capitalisation The conversion of the warrants in August 2012 helped HDFC increase its stock of Tier I capital by Rs 3285 crore. Consequently, strong profitability in FY 13 coupled with additional Tier I capital has ensured that HDFC s CRAR remains at a sound 16.35% with Tier I capital of 13.85% as compared to regulatory requirement of CRAR of 12% and Tier I capitalization levels of 6%. 4 Asset Quality HDFC has maintained sound asset quality indicators over the years. Its overall Gross NPA level has seen an improvement from 0.74% in FY12 to 0.70% in FY13. The Gross NPA in the corporate segment has seen an improvement from 1.05% as on March 12 to 0.91% as on March 13 while the Individual loan book has seen a marginal deterioration in asset quality with its Gross NPA at 0.58% as on March 13 compared to 0.55% as on March 12.The company has excess provisions to the tune of Rs 286 crores and hence the reported Net NPA level is Nil as on March 13 (Nil as on March 12). With dual rate home loans which have now transitioned to floating rate completely in Q1FY14, ICRA believes there could be a potential release of provisions to the tune of Rs crore, further fortifying the Corporation against asset quality losses. ICRA Rating Services Page 4

5 Company Profile HDFC is India s premier housing finance entity in existence for over 35 years. With a presence in banking, insurance and asset management, the HDFC group is an important part of the Indian financial services. During the year ended March 31, 2013 HDFC reported net income of Rs 7,205 crore and had an asset base of Rs 1,94,889 crore as compared to a net income of Rs. 6,176 crore and an asset base of Rs. 1,66,892 crore in FY12. The company s profit after tax (PAT) stood at Rs. 4,848 crore during the year ended March 31, 2013 as compared to Rs. 4,123 crore during the year ended March 31, Capital Adequacy of HDFC stood at 16.35% (Tier I at a comfortable 13.85%) as on March 31, 2012 as against 14.6% (Tier I at a comfortable 11.7%) as on March 31, In May 2012, HDFC s board passed the resolution to raise the limit of shareholding by FII from 74% to 100%. As on June 14, 2013 the total FII shareholding stood at 74.19%. Table 1 List of shareholders (with more than 1% shareholding as on June 14, 2013) Share holding Pattern % Shareholding Promoter Group 0.00% Mutual Funds/UTI 2.70% Financial Institutions/Banks 1.86% Insurance Companies, including- 7.77% Foreign Institutional Investors 74.19% FDI- Foreign Institutions 0.32% Bodies Corporate 2.85% Individual Shareholders 10.3% Total % Consistent business growth in FY 13, stronger growth seen in the individual loan book HDFC s loan book(net of loans sold) increased by ~ 21% in FY 13 (20% in FY 12) to Rs 1,70,046 crore. Disbursements grew by ~16% in FY 13 as against 18% in FY 12 while growth in loans sanctioned increased by ~15% in FY 13 vis-à-vis 20% in FY 12. Table 2 Trend in Approvals and Disbursals Rs. crore Mar-13 Growth Mar-12 Growth Mar-11 Growth Mar-10 Disbursements 82,452 16% 71,113 18% 60,314 20% 50,413 Approvals 103,260 15% 90,154 20% 75,185 24% 60,611 Source: HDFC 81% of the incremental lending in FY13 was towards the individual loan book and hence the mix between individual loans and non-corporate exposures skewed slightly in favour of individual loans as compared to FY 12 (68% of the portfolio constituted by individual loans in FY 13 as compared to 66% in FY 12). As per the management, this trend has continued in Q1FY14 with a larger proportion of the disbursements being accounted for by the individual home loans. Table 3 Loans Outstanding Source: HDFC Rs cr Mar-13 Growth Mar-12 Growth Mar-11 Growth Mar-10 Total Loans 170,046 21% 140,875 20% 1,17,127 20% 97,967 Growth in the Individual Home Loan Segment was mainly fuelled by increase in demand from Tier II and Tier III cities such as state capitals as well as other major cities becoming the newer engines of growth. Growth in the metro cities has stabilized with growth shifting to newer projects at the outskirts of these cities. ICRA Rating Services Page 5

6 Within the individual home loan segment, the sourcing mix remained stable. During FY13, the origination done through affiliates (HDFC Bank and HDFC Sales Private Limited) contributed to 74% of the total disbursements (75% in FY12), while HDFC s existing relationships with corporates drove the growth in the non-individual financing book. In the absence of any significant property price correction in the metros and Tier I cities, and improved affordability in Tier II and Tier III towns and cities, ICRA expects growth to come from these geographies for the Corporation. As the slowdown in the economy remains palpable, the approach to builder financing from the Corporation has grown increasingly conservative. Add to that the fact that demand for builder loans has also reduced somewhat, ICRA expects further loan book growth to be led by individual loans. Consequently, the trend of the loan portfolio mix in favour of individual loans may remain strong going forward as well. ICRA expects the HDFC s loan book to continue to grow at a consistent pace with the growth in the near future. Table 4 Origination Mode Mar-13 Mar-12 Mar-11 Mar-10 HDFC Sales Private Limited 46% 47% 46% 46% HDFC Bank 28% 28% 30% 30% Direct Walk Ins 11% 14% 16% 18% Other DSAs 15% 11% 8% 6% Total 100% 100% 100% 100% Source: HDFC HDFC uses the sourcing agent only for referrals and completion of documentation, while appraisals (including technical and legal) are done by HDFC employees. The proportion of the business from other DSAs rising is explained by the fact that HDFC continues to get increased business from Tier II and III towns where dependence on DSAs have risen as the Corporation continues to spread its network. As the Corporation remains in expansion mode in these geographies, ICRA expects this trend of increased business from DSAs to continue going forward as well. Individual home loan portfolio well diversified HDFC has a sound understanding of the risks associated with the mortgage finance business by virtue of its long market presence and its strong franchise. It has built up its individual mortgage loan portfolio gradually while adhering to its stringent origination processes, and its portfolio is well-diversified across geographic locations. HDFC s exposure in the loan against property segment is small, as it believes the risks here are higher. Some key characteristics of HDFC s individual home loan portfolio are brought out in Table 5. Table 5: Key portfolio Characteristics Mar-13 Mar-12 Mar-11 Mar-10 Average LTV 65% 65% 68% 67% Maximum LTV 80% 80% 80% 85% Average Ticket Size Rs lakh Rs lakh Rs lakh Rs. 17 lakh Source: HDFC The salaried class dominates HDFC s individual home loan portfolio, with a significant proportion of that having been originated during the last five to six years. HDFC maintains strict control on the quality of origination, which along with its efficient monitoring and recovery systems, has helped it maintain sound asset quality. Moreover, the HDFC management is sensitive to the issue and monitors the portfolio proactively. This is evident by the presence of specialized team within HDFC for property value appraisal, reliance on the CIBIL database for making credit decisions, amongst others. HDFC also has a specialized appraisal team for income assessment within the selfemployed segment. ICRA Rating Services Page 6

7 Blended asset quality improves; marginal deterioration in NPA levels in the Individual Loan Book; decrease in concentration in the wholesale financing book Asset quality for the company remained strong with Gross NPAs reported at 0.70% as at March 2013 (0.74% as at March 2012). While marginal deterioration was seen in the individual book where gross NPAs inched up to 0.58% as at March 2013 as compared to 0.55% as at March 2012, the non-individual loan book has seen an improvement with Gross NPA at 0.91% as on March 2013 as compared to 1.05% as on March The Non-Individual loan book has seen a decline in the concentration with the top 50 borrowers accounting for 61% of the total non-individual book as at March 2013 as compared to 70% at March The company has maintained sound asset quality indicators and has been able to control asset quality in its non-individual book effectively. As compared to the regulatory requirement of Rs 1,506 crore against Gross NPAs, the Corporation has excess provisions to the tune of Rs 286 crore. Hence, the net NPA stood at nil as on March 31, 2013 (Nil as at March 31, 2012). In ICRA s view HDFC s tight originations as well as its proactive recovery procedures should help it limit slippages and consequently the adverse impact on profitability indictors. With all the dual rate loans transitioning to floating rate with effect Q1FY14, the Corporation expects release of Rs crore of credit provisions. Consequently, ICRA believes that this would help the corporation in maintaining its favourable Nil Net NPA levels. Table 6 Asset Quality Rs crore Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Gross NPAs 1,199 1, Provisions 1,792 1,671 1, Net NPAs Nil Nil Gross NPA% 0.70% 0.74% 0.77% 0.79% 0.81% Net NPA% 0.00% 0.00% 0.00% 0.13% 0.09% Provision Cover 100% 100% 100% 84% 89% Net NPA/Net-worth 0.00% 0.00% 0.00% 0.84% 0.61% Capitalization levels stronger with warrant conversion leading to additional Tier I capital HDFC capital adequacy ratio remains comfortable at 16.35% as on March 31, 2013 (Tier I 13.85%) as compared to 14.6% as on March 31, 2012 (Tier I 11.7%). As on March 31, 2012, the company has 5.47 crore outstanding warrants issued at a conversion price of Rs 600 per warrant (adjusted downward after a stock split in FY 10) exercisable up to August 24, As at March 31, 2013, 99.9% of the warrants issued have been converted giving the Corporation Rs 3,285 crore as additional Tier I capital. This conversion of warrants has bolstered the Tier I Capital % from 11.7% to 13.85% from FY12 to FY13. The increase in Capital has also led to a decline in Gearing levels of the company from 7.32 times as on March 12 to 6.35 times as on March 13.Given the strong Tier I ratio, the company has enough head room to manage the growth in business by raising Tier II capital in future. In ICRA s view, in the event of the guidelines pertaining to the Risk Weights for residential projects for builders as brought by RBI being formalized by NHB, HDF s Tier I ratio will get strengthened further which would be very significant positive from the Corporation s perspective. In ICRA s opinion, the Corporation remains well capitalized and leverage levels remain comfortable at present. With strong operating performance likely to continue, subsidiaries getting self sufficient, no major asset quality issues coming to the fore, capitalization levels are expected to remain at elevated levels over the medium term. ICRA Rating Services Page 7

8 Table 7 Capitalisation Rs crore Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Net worth 25,000 19,018 17,317 15,198 13,137 Gearing (times) Tier I % 13.9% 11.7% 12.2% 12.8% 13.2% Tier II % 2.5% 2.9% 1.8% 1.8% 1.9% CRAR 16.4% 14.6% 14.0% 14.6% 15.1% Source: HDFC and ICRA Research Investment portfolio in subsidiaries stable; going forward, capital support to subsidiaries could be limited HDFC has investments in subsidiaries / associates to the tune of ~Rs 8,332.7 crore largely constituted by its 22.8% stake in HDFC Bank (Rs 5,550 crore). However, the corporation also has large investments into Insurance Subsidiaries HDFC Standard Life and HDFC Ergo (in aggregate ~ Rs 2,100 crore). HDFC has has 89.1% stake in Credilla Financial Services, a company into providing educational loans. The Corporation has unrealized gains on its listed investments to the tune of ~Rs 34,000 crore (as at June 28, 2013), more than 85% of which is on its investments in HDFC Bank. Also since most of its subsidiaries are still unlisted, value unlocking in them could provide significant additional unrealized gains. In ICRA s view, with the insurance subsidiaries HDFC Life and HDFC Ergo now reporting profits, the capital support may now be required only for Credila Financial Services (into providing educational loans), which is in its expansion phase. However this capital support is likely to be a small amount. In the event of HDFC Bank (an associate with HDFC having 22.8% stake as at March 2013) raising capital via a follow on public offering, higher capital commitment might be required from the Corporation, to maintain its stake at current levels. However in ICRA s view, with the strong track record of the Corporation to raise capital as and when required, this concern may not be significant. In FY13, the company reported a significant increase in the dividend earned from its investments in subsidiaries and associates from Rs 278 crs in FY12 to Rs 439 crs in FY13. As per the management, the jump in the dividend credited a few subsidiaries is a one-time event, and going forward the dividend levels may be lower than seen in FY13. Also in ICRA s opinion, HDFC s investments into subsidiaries / associates remain sound and in an extreme eventuality of liquidity crisis, value could be unlocked / stakes could be sold in these subsidiaries / associates, hence ensuring that liquidity position as well as capital support for the Corporation remains sound. Access to diverse fund sources helps HDFC maintain competitive cost of funds while maintaining a comfortable asset-liability matching position Over the past two years, HDFC s borrowing profile is seeing a shift in favour of debt market borrowings on account of persistently high interest rates in the economy ensuring that bank base rates remain elevated and consequently bank borrowings expensive. The same trend continued in FY 13, with 56% of the overall borrowing profile of the Corporation being constituted by debt markets borrowings as compared to 45% in FY 12. However, deposits which accounted for ~26% of the overall borrowing mix in FY 12 now accounts for ~33% of overall borrowings as at March 31, Consequently, bank borrowings now account for only 11% of the overall borrowings as at March 31, 2013 as compared to 28% as at March 31, External borrowings remain at negligible levels. Going forward, with interest rates declining but gradually, bank borrowings may continue to remain expensive relative to debt market borrowings or deposits. Consequently, ICRA expects the current skew in favour of debt market borrowings to continue. ICRA Rating Services Page 8

9 Table 8 Funding Mix Rs cr Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Deposits 33% 26% 21% 24% 23% Domestic Term Loans 11% 28% 35% 32% 28% Commercial Paper/ Bonds/Debentures 56% 45% 42% 42% 46% International Borrowings 0% 1% 2% 2% 3% Total 100% 100% 100% 100% 100% Total Borrowings 158, , ,410 96,565 83,856 Source: HDFC and ICRA Research Strong operating performance continues in FY13; Improvement in Net interest income and non-interest income coupled with controlled operating cost enabled post stable operating profits (after provisions) in FY13. Yield on assets increased in line with increase in interest rates in FY 13 (11.47% for FY 13 as compared to 10.98% for FY 12). The cost of funds also reported an increase to 9.04% in FY13 (from 8.56% in FY12) as cheaper borrowings were replaced by more expensive borrowings in FY 13. Consequently, net interest spreads remained stable at 2.43% in FY 13 (2.42% in FY12). Operating expenses as a percentage of Average Total Assets (ATA) stood at 44 bps in FY 13 (0.46% in FY 12). With a cost-income ratio of ~11% over the past few years, HDFC continues to have one of the most efficient cost models in the industry. Consequently, the Corporation reported net PAT of Rs 4,848 crore in FY 13 as compared to Rs 4,123 crore in FY12. As a result of greater growth in the Total Assets the PAT/ATA ratio of the company marginally declined from 2.70% in FY12 to 2.68% in FY13. RONW for FY 13 stood at 22% (23% for FY 12). In FY14, the company s profitability is expected to be positively impacted by the release of Rs crs of excess provisions made for the dual rate loans which are no longer required. The release of provisions will lower the provisions to be made in the next few years and hence improve PAT. HDFC Ltd had outstanding ZCB s worth ~ Rs 5000 crs as on March 31, The company adjusts for the interest for the same from its Securities Premium account instead of expensing it through the Profit and Loss Statement. The interest of Rs 438 crs on ZCB, net of taxes in FY13 if adjusted in the P&L would still yield robust profitability with a PAT of Rs ~4400 crores and a RONW of ~19% in FY13. ICRA believes that HDFC s focus to grow while maintaining its interest spread, competitive operating cost structure and a tight control on asset quality would benefit the earnings and solvency of HDFC going forward as well July 2013 ICRA Rating Services Page 9

10 Rating Action Instrument Amount Rating Action (June 2013) Non-Convertible Debentures Rs 25,000 crore [ICRA]AAA( stable)/assigned Issuer Rating N.A IrAAA (Stable) / reaffirmed Non-Convertible Debentures Rs. 84,796 crore [ICRA]AAA( stable)/ reaffirmed Subordinated Debt Programme Rs crore [ICRA]AAA( stable)/ reaffirmed Fixed Deposit Programme N.A MAAA (stable) / reaffirmed Short Term Debt Programme Rs 25,000 crore [ICRA]A1+ / reaffirmed ICRA Rating Services Page 10

11 Summary Financials Rs. Crores Mar-13 Mar-12 Mar-11 Mar-10 Interest Income 20,070 16,369 12,025 10,640 Interest Expenses 13,891 11,157 7,560 7,063 Net Interest Income 6,179 5,212 4,465 3,577 Fee Based income 1, Total Net Income 7,205 6,176 5,158 4,195 Operating expenses Operating Profits 6,402 5,475 4,577 3,719 Provisions / write offs Operating profits (post provisions) 6,257 5,395 4,507 3,661 Subvention money / sale from investments PBT 6,573 5,666 4,867 3,870 Tax 1,728 1,555 1,332 1,090 deferred tax (3) (12) - - PAT 4,848 4,123 3,535 2,781 Dividend 2,261 1,888 1,534 1,205 Liabilities Equity Net Reserves 24,691 18,722 17,023 14,911 Net Worth 25,000 19,018 17,317 15,198 Borrowings 158, , ,410 96,565 Other Liabilities 11,071 8,746 6,328 4,593 Total Liabilities 194, , , ,356 Assets Total Loans 170, , ,127 97,967 Investments 13,613 12,207 11,832 10,727 Current assets 11,240 13,810 10,095 7,661 Total Assets 194, , , ,356 ICRA Rating Services Page 11

12 % increase Mar-13 Mar-12 Mar-11 Mar-10 Interest Income 23% 36% 13% 0% Interest Expenses 25% 48% 7% -5% Net Interest Income 19% 17% 25% 11% Fee Based income 7% 39% 12% 50% Total Income 17% 20% 23% 16% Operating expenses 15% 21% 22% 12% Operating Profits 17% 20% 23% 16% Provisions / write offs 81% 14% 21% 16% Operating profits (post provisions) 16% 20% 23% 16% Subvention money / sale from investments 17% -25% 72% 730% PBT 16% 16% 26% 22% Tax 11% 17% 22% 17% PAT 18% 17% 27% 24% Dividend 20% 23% 27% 21% Liabilities Equity 5% 1% 2% 1% Net Reserves 32% 10% 14% 16% Net Worth 31% 10% 14% 16% Borrowings 14% 21% 20% 15% Other Liabilities 27% 38% 38% 3% Total Liabilities 17% 20% 20% 15% Assets Total loans 21% 20% 20% 15% Investments 12% 3% 10% 2% Current assets -19% 37% 32% 33% Total Assets 17% 20% 20% 15% ICRA Rating Services Page 12

13 Rs. Crores Mar-13 Mar-12 Mar-11 Mar-10 Interest Bearing Assets 188, , , ,261 Interest Bearing Liabilities 164, , ,522 98,261 Average Total Assets 180, , , ,898 Yield on advances 12.19% 11.82% 10.46% 10.90% Yield on average Interest Bearing assets 11.47% 10.98% 9.58% 10.02% Cost of average Interest Bearing liabilities 9.04% 8.56% 7.01% 7.69% Interest Spreads 2.43% 2.42% 2.57% 2.33% Interest Earned / Avg. Total Assets 11.09% 10.70% 9.42% 9.77% Interest Paid / Avg. Total Assets 7.68% 7.29% 5.92% 6.49% Net Interest Margin/Avg. Tot Assets 3.42% 3.41% 3.50% 3.29% Non Interest Income/Avg. Tot Assets 0.57% 0.63% 0.54% 0.57% Operating Expenses/Avg Total Assets 0.44% 0.46% 0.45% 0.44% Operating profits /ATA 3.54% 3.58% 3.58% 3.42% Provisions 0.08% 0.05% 0.05% 0.05% Operating Profit / Avg Total Assets 3.46% 3.53% 3.53% 3.36% Trading Profits ( securitization income) 0.17% 0.18% 0.28% 0.19% PBT / Average Total Assets 3.63% 3.70% 3.81% 3.55% Tax / PBT 26.24% 27.23% 27.37% 28.15% PAT / Average Total Assets 2.68% 2.70% 2.77% 2.55% (PAT - dividend) / Average Total Assets 1.43% 1.46% 1.57% 1.45% PAT/ Average Networth 22.03% 22.69% 21.74% 3.79% Dividend Payouts 46.64% 45.80% 43.41% 43.34% Cost to income ratio 10.68% 10.87% 10.52% 10.80% Tier 1 % 13.85% 11.70% 12.20% 12.80% Tier II % 2.50% 2.90% 1.80% 1.80% CRAR 16.35% 14.60% 14.00% 14.60% ICRA Rating Services Page 13

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