Housing Development Finance Corp. Ltd (HDFC), the country's largest housing financier, saw its profit nearly halved in the March quarter of FY15, as a result of provision for deferred tax liability.
HDFC's net profit increased by 8% to Rs 1,862 crore for the quarter ended March 2015, compared to a profit of Rs 1,723 crore in the same quarter in FY14. On a consolidated basis, net profit was up 10% to Rs 2,646 crore.
The mortgage financier had to set aside Rs 119.77 crore as deferred tax liability in the January-March quarter against Rs 87.29 crore in December quarter.
Analysts say that net profit growth would have come at 15% in the absence of deferred tax liability.
"This was the first year they had to make this provision for deferred tax, so the impact may be higher but going forward the numbers will adjust. The company will also benefit from lower cost of funds next year as domestic interest rates drop and they also make use of the $500 million approval to raise money from abroad," said Ravi Shenoy, assistant vice president, midcaps research, Motilal Oswal Securities Ltd, told Live Mint.
The bank's consolidated profit growth is less than its usual 20% rate due to the deferred tax liability, Shenoy said.
However, the fall in net profit due to deferred tax provision was partly offset by an increase in individual loan growth.
Individual loans increased by 23% in the fourth quarter, while non-individual loans picked up by 14% on annual basis. Loans for individual homebuyers accounted for 71% of total loan book in the financial year.
Overall, the size of bank's loan book rose to Rs.2.28 trillion in the March quarter, from Rs.1.97 trillion in the corresponding quarter a year ago.
"The results for the fourth quarter could not be taken at face value. Besides the absence of deferred tax liability in FY14, the fourth quarter of FY14 received exception interest income, resulting in a bunching up of interest income from Hiranandani Constructions, which was classified as an NPA in earlier quarters. This resulted in net interest income showing lower growth in FY15," Keki Mistry, vice-chairman and CEO, HDFC, told The Times of India.