HDFC shares climb 3% despite NHB monetary penalty

Shares of HDFC climbed over 3 percent in the morning trade on BSE on October 1 even as a day ago the company said National Housing Bank (NHB) a monetary penalty on it.

“NHB has imposed a monetary penalty of Rs 1,50,000 plus GST on the corporation for non-compliance with two provisions of the Housing Finance Companies (NHB) Directions, 2010 during the financial year 2018-19,” said HDFC in a BSE filing on September 30.

Shares of the company have been in the green since September 25 and if the stock closed higher today, it will be its fifth consecutive session of gains.

Domestic brokerage firm JM Financial has a buy call on the stock with a target price of Rs 2,200.

“With the worst of the NBFC crisis now behind for the sector especially concerning the liability side, we see strong franchises like HDFC to be key beneficiaries going forward,” said JM Financial.

As per the brokerage firm, key strengths of the name include: (a) 74 percent individual borrower base with limited exposure to COVID19 hit sectors like malls, hotels and that too with the top-notch players like Raheja, Prestige, DLF, etc., (b) 82 percent of loans via self- and HDFC Bank- sourcing which ensures control over asset quality, (c) strong liability franchise including a deposit base which at Rs 1.4 lakh crore is bigger than most mid-sized banks and (d) more than 40 years of real estate/home loan underwriting experience pan-India.

JM Financial is of the view as borrowing costs for the NBFC sector trend down driven by both drop-in rates and spreads, HDFC is expected to see a significant drop in funding costs which will support incremental spreads going forward.

Shares of HDFC traded 3.18 percent higher at Rs 1,794.60 on BSE at 11:07 hours.

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