The results of HDFC for the year ended March, 2000 show a steady growth in assets and profits. HDFC being the premier housing finance institution in the country accounts for more than one half of the market in housing finance. Following the rate cuts announced by the Central Bank, the lending rates have seen a significant reduction. On May 5, the company announced a further cut of 0.25 per cent on the housing loans. These reductions could give a big impetus to the business volumes of the housing finance companies and given the leadership status of HDFC, it is likely to be a major gainer.

Although the reduction in the interest rates raise some concerns on the profitability front because the simultaneous cut in the deposit rates would neutralise the impact of rate cuts on profitability.

Coming to the financials, the total income and PAT grew by 15 per cent and 20 per cent respectively, as compared to the last year. The total assets witnessed a growth of 28 per cent. Loan approvals during the year witnessed a growth of 30 per cent as compared to disbursals which grew by 31 per cent Individual loan business, the mainstay of the corporation's loan business, has seen a robust growth trend recording a rise of 49 per cent and 50 per cent respectively compared to the corresponding period last year. However, on the expenses front, income expenses and staff expenses have shown a sharp rise of 14.9 per cent and 43 per cent respectively.

The non-performing loans component in aggregate terms has risen for the year, however, as a percentage of the total portfolio it has gone down and amounted to 0.90 per cent as against 1.01 per cent last year. The capital adequacy ratio stood at a satisfactory 13.7 per cent of the risk weighted assets as against the prudential requirements of 8 per cent prescribed by the NHB.

Of late, HDFC has taken several initiatives in the e-commerce arena that could augur well for it in the future, and perhaps given an upward boost to its market discounting. It has launched its own Internet portal in joint venture with Mahindra and Mahindra which will provide a variety of real estate services. Also, it has recently picked up 12.5 per cent stake in a B2B construction portal indiaconstruction.com apart from picking up 5 per cent stakes in two prominent finance portals.

HDFC has also set up an asset management company for offering mutual fund services and products which will be a wholly owned subsidiary of HDFC. HDFC has tied up with Standard Life Investments (SLI) of UK to form a joint venture for the AMC. SLI can take up to 26 per cent of the HDFC AMC over a period of time. The HDFC mutual Fund is expected to launch its scheme in July,2000. Also, HDFC is planning a foray into insurance business in alliance with the UK based Standard LIfe Assurance company.

As and when it materialise, this move is likely to give a major push to market sentiment for the stock.

On the operational front, it has launched floating interest loans which could increase the volumes in the individual as well as other loans business. Also, it opened 19 new branches this year to expand its reach.The stock currently is trading at the lower end of its valuation spectrum and the stock doesn't fully reflect the intrinsic potential and the HDFC brand name. For medium-term investors, the outlook appears bright.