January 30, 2014
Mumbai
Housing Development Finance Corporation Limited
 
'CRISIL AAA/Stable' assigned to NCD issue
 
Rs.250 Billion Non-Convertible Debenture Issue CRISIL AAA/Stable(Assigned)
Bonds Aggregating Rs.1.0085 Billion CRISIL AAA/Stable(Reaffirmed)
Non-Convertible Debentures aggregating Rs.1528.68 Billion CRISIL AAA/Stable(Reaffirmed)
Subordinated Debt Aggregating Rs.50.0 Billion CRISIL AAA/Stable(Reaffirmed)
Rs.250 Billion Short Term Debt CRISIL A1+(Reaffirmed)
Fixed Deposits FAAA/Stable(Reaffirmed)

CRISIL has assigned its 'CRISIL AAA/Stable' rating to the Rs.250.0 billion non-convertible debenture issue of Housing Development Finance Corporation Ltd (HDFC), and has reaffirmed its ratings on HDFC's other outstanding debt instruments and fixed deposit programme at 'CRISIL AAA/FAAA/Stable/CRISIL A1+'.

The ratings continue to reflect HDFC's leading market position and sound track record in the housing finance business, strong asset quality, diversified and stable resource profile, and healthy capitalisation and profitability. These rating strengths are partially offset by HDFC's exposure to intense competition in the housing finance segment.

HDFC is India's largest housing finance company, with profitable growth over the past 35 years in the individual housing and corporate segments. While competition has increased over time, with the entry of new players and greater focus by banks on this segment, HDFC has maintained its market share. As on December 30, 2013, HDFC's loan book stood at Rs.1922.7 billion, a growth of 19.5 per cent over the previous year.

HDFC has strong asset quality, with gross non-performing assets of 0.77 per cent as on December 31, 2013 (0.75 per cent as on December 31, 2012). Nevertheless, HDFC's sizeable exposure to the builder and corporate segments will remain a sensitivity factor. The resource profile continues to be well-diversified, lending flexibility to HDFC's borrowings. During the tight liquidity situation in the second quarter of 2013-14, HDFC had increased its share of bank borrowings; however, in the third quarter, incremental borrowings have been predominantly through market instruments.

HDFC's financial risk profile remains sound, marked by good capitalisation and profitability. As on December 31, 2013, HDFC had an overall capital adequacy ratio (CAR) of 19.1 per cent and a Tier-I CAR of 16.6 per cent (17.5 per cent and 14.9 per cent respectively as on December 31, 2012). HDFC's capital adequacy ratios have increased in the current year primarily due to revision in risk weights by the regulator, National Housing Bank. HDFC's networth was Rs.290.0 billion as on December 31, 2013 compared to Rs.255.5 billion as on December 31, 2012. HDFC's earnings profile is marked by healthy interest spreads, low expense levels, and good returns on net worth. The company has maintained an interest spread of 2.15 to 2.35 per cent over the past four years (2.25 per cent in the nine months ended December 31, 2103). 
Outlook: Stable

CRISIL believes that HDFC will maintain a robust credit risk profile over the medium term, backed by its strong asset quality, and its healthy capitalisation and profitability. CRISIL also believes that HDFC's strong franchise and fundamentals will enable the company to maintain its competitive position, supporting its present ratings. The outlook may be revised to 'Negative' if HDFC's asset quality or profitability weakens significantly.

About the Company

HDFC, a housing finance company, was incorporated in 1977; its initial shareholders included the International Finance Corporation, Washington, and the Aga Khan Trust. As on December 31, 2013, HDFC's loan book stood at Rs.1922.7 billion, of which 70 per cent consisted of loans to individuals, while loans to corporate entities, rental discounting, and construction finance accounted for the remainder.
 
For 2012-13, HDFC reported a profit after tax (PAT) of Rs.48.5 billion (Rs.41.2 billion for the previous year) on income from operations (net of interest expense) of Rs.72.6 billion (Rs.62.0 billion). For the nine months ended December 31, 2013, HDFC reported a PAT of Rs.37.2 billion (Rs.32.9 billion for the corresponding period the previous year) on income from operations (net of interest expense) of Rs.50.5 billion (Rs.43.9 billion).

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About CRISIL LIMITED
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

About CRISIL Ratings
CRISIL Ratings is India's leading rating agency. We pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we have a leadership position. We have rated over 60,000 entities, by far the largest number in India. We are a full-service rating agency. We rate the entire range of debt instruments: bank loans, certificates of deposit, commercial paper, non-convertible debentures, bank hybrid capital instruments, asset-backed securities, mortgage-backed securities, perpetual bonds, and partial guarantees. CRISIL sets the standards in every aspect of the credit rating business. We have instituted several innovations in India including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We pioneered a globally unique and affordable rating service for Small and Medium Enterprises (SMEs).This has significantly expanded the market for ratings and is improving SMEs' access to affordable finance. We have an active outreach programme with issuers, investors and regulators to maintain a high level of transparency regarding our rating criteria and to disseminate our analytical insights and knowledge.

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Last updated: May, 2013

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January 30, 2014

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