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MUMBAI, Oct. 17

HDFC'S board of directors on Thursday recommended issuing bonus shares in the ratio of 1:1, partly with the intention of capitalising a part of the company's reserves and partly to commemorate the 25th year of its operations.

Riding on the back of higher spreads and larger loan portfolio, HDFC's net profit at Rs 167.15 crore rose 20.6 per cent for the quarter ended September 30, 2002, over that of the second quarter of the previous year (Rs 138.49 crore).

Although housing loan rates had been declining, the fall in the cost of funds had been even steeper, resulting in increased spread, currently at 2.01 per cent, up from 1.96 per cent as of March this year, said Mr Keki Mistry, Managing Director, HDFC.

On account of its increased loan portfolio, income from operations rose 13.2 per cent quarter on quarter from Rs 671.69 crore to Rs 760.52 crore.

Net profit for the six-month period ended September 30, 2002, rose 21 per cent to Rs 304 crore from Rs 253 crore. The company's loan portfolio increased to Rs 20,036 crore, up 25 per cent over the portfolio during the same period the previous year. Loan approvals during the six-month period grew 32 per cent.

The retail business continued to grow at a brisk pace, said Mr Mistry, with individual loan approvals up 37 per cent from September last year.

The company was getting access to cheaper funds, he said. Following the five-year non-convertible debenture of Rs 150 crore raised recently by HDFC at 7.05 per cent, the company had offers to do 10-year paper at 7.5 per cent, said Mr Mistry. "If the company were to go in for the offers, it will be for another Rs 100 crore", he said. HDFC officials denied reports of a possible merger of HDFC and HDFC Bank. "It does not make financial sense," said Mr Mistry. The combined profit of these entities would be lower than their individual profits put together, he said.

HDFC Bank will be the HDFC group's general sales agent for its AMC products, its life insurance products as well as its housing loans, earning commissions or a fee on the same. The bonus issue is subject to shareholder approval at an EGM scheduled for the first week of December. The record date for the issue would be announced shortly, said Mr Mistry.

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