Credit rating agency, CRISIL has assigned its AAA/Stable rating to the Rs 5 billion subordinated bond programme of Housing Development Finance Corporation (HDFC), and has reaffirmed its ratings on the company`s other outstanding debt instruments and fixed deposit programme at AAA/FAAA/Stable/P1+.

The ratings continue to reflect HDFC`s (Q,N,C,F)* sound track record, leading market position, strong asset quality, and diversified and stable resource base. The ratings also factor in HDFC`s healthy capitalisation and profitability.

These rating strengths are partially offset by HDFC`s exposure to increasing competition in the housing finance segment.

HDFC is India`s largest housing finance company, with overall disbursements growing at over 25% per annum over the past few years. It has a track record of over 30 years of profitable growth in the individual and corporate housing finance segments.

HDFC disbursed Rs 335.3 billion during the first nine months of 2009-10 (refers to financial year, April 1 to March 31), registering a growth of 23% over the corresponding period in the previous year. As on December 31, 2009,

HDFC`s gross non-performing assets (GNPAs) were at 0.94% of its total loan portfolio, slightly better than its GNPA level of 1.01% as on December 31, 2008.

HDFC`s strong business risk profile is complemented by its comfortable financial risk profile, with good capitalisation levels, profitability, and liquidity. As on December 31, 2009, HDFC had an overall capital adequacy ratio (CAR) of around 14.8%, and a Tier-I CAR of 13.3%. HDFC`s earnings profile is marked by healthy interest spreads, low expense levels, and good returns on net worth (RoNW). The company maintained an interest spread in the range of 2.15 to 2.25% during the past four years.

CRISIL believes that HDFC`s credit risk profile will continue to be strong. The company`s sizeable exposure to the non-housing segment will, however, remain a key sensitivity factor.

Outlook: Stable

CRISIL believes that HDFC will maintain its strong credit risk profile on the back of strong asset quality, and healthy capitalisation and profitability.

CRISIL also believes that HDFC`s strong fundamentals will enable the company to withstand competition in the housing finance market, and support the current ratings.

The outlook may, however, be revised to `Negative` if the company`s profitability declines steeply, or if its asset-liability mismatches increase substantially.

Shares of the company gained Rs 18.55, or 0.76%, to settle at Rs 2,475.20. The total volume of shares traded was 38,169 at the BSE (Thursday).