LIC Home Finance, an arm of LIC, on Wednesday reported a 36 per cent rise in net profit at Rs. 310.51 crore in the June quarter, up from Rs. 227.75 a year ago.

The spike in net income was driven by higher net interest margins which were propped up by a 24 per cent increase in retail credit.

Income from operations of the third largest mortgage player in the country rose 23 per cent to Rs. 2,149 crore, while net interest income rose at 30 per cent to Rs. 455 crore, managing director and chief executive V.K. Sharma said in Mumbai.

Significantly, despite the challenging environment, the total bad loans rose marginally to 0.80 per cent in the quarter from 0.71 per cent year ago. Mr. Sharma attributed this to the lower cost of funds as the company had borrowed around Rs. 800 crore during the quarter at a lower rate of interest.

Increase in total NPAs was due to three developer accounts worth Rs. 230 crore turning bad. The company has shares worth 2.5 times more than the value of these loans, Mr. Sharma said, adding that legal recovery process is underway.

These developers, he said, without naming, are in Mumbai, Chennai and Indore. However, NPAs in the retail book improved to 0.51 per cent from 0.74 per cent.

Mr. Sharma, however, warned that ongoing quarter will be challenging and if the monetary tightening by the RBI is not rolled back, the company will have to increase lending rates — which stand at 10.25 per cent for individuals and 15.4 per cent for commercial players/ developers.

He also warned that the company will have to see 25 bps rise in its cost of funds if the current cost of money remains longer than expected.

Following the cash-for-loans scam of 2011, Mr. Sharma said the company has been deliberatively bringing down its developer loan portfolio, which dived to Rs. 2,140 crore in the June quarter from Rs. 3,042 crore a year ago.

Despite the challenging environment, the company also improved its net interest margin by 12 bps to Rs. 2.30 per cent during the quarter and set 2.50 per cent NIM target for the fiscal.

Its total asset book rose 22 per cent to Rs. 80,137 crore during the quarter, out of which the individual loan books constituted Rs. 77,727 crore, which grew 24 per cent during the quarter.

The net individual loan disbursals rose 13 per cent to Rs. 5,069 crore during the quarter, while the same for developer loans were a paltry Rs. 58 crore, massively down from Rs. 321 crore.

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