Mortgage lender HDFC Ltd posted a 20% rise in net profit for the quarter-ended September led by higher income from operations and profit on sale of investments.

HDFC said its net profit increased to Rs 971 crore from Rs 808 crore a year ago. Income from operations rose to Rs 4,077 crore from Rs 2,907 crore in the year-ago period.

Profit from sale of investments stood at Rs 86.8 crore while its net interest margin for the September quarter was at 4.3%.

Its loan book size also increased by a fifth to Rs 127,000 crore as of Sept. 30 - in line with its annual guidance.

The lender expects demand for home loans to be helped by rising incomes in burgeoning middle-class households and a low penetration of housing loans in Asia's third-largest economy.

Keki Mistry, vice chairman of HDFC said, in a televised press briefing, that he did not see an adverse impact of the rate hikes on its loan growth target or on asset quality, which has been steadily improving.

The Reserve Bank of India (RBI) raised interest rates for the 12th time in 18 months in October to fight high inflation and signalled more was to come.

Industry-wide deposit growth was higher at 6.1% as of Sept. 9 from the beginning of the fiscal year in April, compared with a 3.4% growth in loans, data from the central bank showed.

HDFC competes with India's top commercial bank State Bank of India, No. 2 ICICI Bank and a host of other banks and financial institutions for a bigger share of the mortgage loan market.

Mistry said the company's spreads, the difference between borrowing and lending rates and a key gauge of profitability, would remain in the range of 2.15% to 2.35%. For the September quarter, it stood at 2.28%.

At 2.31 p.m., HDFC's shares, valued by the market at nearly $20 billion, were up 0.7% at Rs 671.45 in a weak Mumbai market.