Announcing the financial results for the first quarter of 1998-99 at the company's 20th annual general meeting, HDFC chairman Deepak Parekh said the housing finance company would be able to achieve its targeted growth in the net profit during the year.

The country's leading housing finance company had posted a net profit of Rs 293.36 crore in 1997-98 on the back of a 31 per cent growth in disbursements. The gross profit grew by 16.90 per cent to Rs 911.33 crore in the first half of the current fiscal.

However, the company has provided for higher depreciationat Rs 13.27 crore, compared with Rs 9.75 crore in the corresponding quarter of the previous fiscal. The provision for tax is lower at 12.30 crore, compared with Rs 13.30 crore in the previous fiscal. Last fiscal, the total tax provision was at Rs 58 crore. Income from operations also grew by 19.20 per cent to Rs 395.37 crore in the first quarter.

The other income for the 1998-99 first quarter was at Rs 60.18 lakh, compared with Rs 23.33 lakh for the corresponding quarter in the previous year. The interest expenditure for HDFC in the first quarter rose by 21.26 per cent to Rs 287.98 crore while the other expense at Rs 16.85 crore more or less remained at the same level as the previous year's corresponding period.

Approvals and disbursements in respect of individual loans were higher by 42 per cent and 32 per cent respectively compared with the corresponding period in the previous year.

On HDFC's plans to foray into the insurance business, Parekh said: "We do not know how the insurance sector will openup. We may have to float a separate company by ourselves rather than with a foreign partner." HDFC has lined up plans to enter the life insurance business.

Parekh said that HDFC may enter into the auto finance business at a later stage if it is found viable. At present, the company has interest in auto finance through Maruti Countrywide Finance in which it has a 37 per cent stake.

INSIGHT -- margins dip sharply

Although HDFC's sanctions and disbursements are up in the first quarter of 1998-99, the margins have dipped sharply compared with its annual performance in 1997-98. So far the strategy of focussing on the retail market for both housing loans and deposits has resulted in higher percentage of disbursements to individuals and increase of deposit base from retail investors. Cuts in lending rates last year have resulted in spreads being reduced, which has led to a drop in the operating margins. Net margins, however, have not been affected as much because provision for tax has been at a presentrate of 15 per cent compared with 19 per cent in the first quarter of 1997-98.