Fundamental analysis of HDFC bank (2013) by students of Era Business School, New Delhi (PGDM 2012-14)

2. Mission Funda Analysis
• Banking Sector.
• HDFC Bank.
• Expendables:– Manoj Kajla
– Praveen Yadav
– Col Ajay K Raina

3. Macro E Outlook
• To Mr A :Uncertainities+Volatility+PolicyParalysis.
• To Mr B:Survivor+FundamentallyStrong+Recoil.
• EO/PMO 2013-14:– GDP and FOREX Res headed South.
– Great Monsoons and improving CAD & Fiscal D.
– Rupee Northwards.

4. Macro E & Banking
• Liquidity tightening:– CRR/99% to 95%.
– Repo-MSF gap/300 to 150 pts.
• News of NPAs and Provisions.
• Industry under stress but in a consolidated,
competitive and risk-management mode.
• Banking Reforms still on.

5. Porters’ 5 Forces
• Barriers high but entrepreneurial threats and
Insurance companies venturing into mortgage.
• Suppliers affected by Inflation; steal HR.
• Buyers, esp corporates, are KINGS!
• Substitutes – Black Money, NBFCs, 0% Fin.
• Competition – Not all inclusive and yet all
available covered; ‘pay’ to lure.

6. Indian Banking Industry...
• Planning Commission’s 12th Plan + Vision 2020:
– Qualitative rather than quantitative expansions.
– 13.4% ahead vis-à-vis 16.7% earlier (05 yrs).
– 80% banking through PSBs.
• The Present Scene.
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–
–
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PSBs focusing on reducing frills and NPAs.
Pvt Banks consolidating.
Pvt ones are leaders in technology.
PSBs had an edge in penetration but competition catching
up.
• Raghuraj’s Committee – more small, localised ones.

7. …Indian Banking Industry
• New RBI Governor
– Industry optimistic.
– The pressure would continue for a while.
• Big SBI v/s more efficient HDFC and AXIS Bank.
• The future that envisages growth of the nation,
cannot ignore a parallel growth of banking
sector………….. that being something inevitable,
future looks bright for the industry despite present
hiccups and glitches.

8. HDFC Bank
• Compounded annual growth of 29.5% - 10 yrs.
• Net interest margin = 4.5% v/s 3.77% of SBI
(Means a lot when ₹ 35,861 Crore are involved)
• NPAs of 0.18% v/s 5.6% of PSBs.
• Promoters (22.83%), FIIs (34.07%) and total
Institutional (42.6%)….. Indicate something!
• No dip in profits (YoY) till date.

9. KPIs as v/s SBI
(Mkt Cap of 151,378 : 110,242 ; Market Share of 5% v/s 18%)
•
•
•
•
•
•
•
•
NPM R (PAT/Total Income) -16% v/s 3.77%.
Cost/Income R – 48% v/s 45%.
Investments: Provisions – 3 times v/s 3 times.
ROE – 18% v/s 12%.
PE R – 22 v/s 8 (Industry – 9.31).
CAR – 16.8% v/s 12.9% vis-à-vis 9% Basel.
NPA – 0.18% v/s 5.6%
Nifty Weightage – 32.5 v/s 11.6

10. Conclusion….
• Macro E.
– Strong fundamentals;
– Growth path;
– Banks have a role to play…. K Factor.
• Banking Industry.
– Tough times do not last long; tough guys do.
– Stressful times and YET HDFC has out-performed.

11. ….Conclusion
• HDFC Bank.
– Lean, mean and smart : 5% share; Top in cap.
– Trading at 5x BV.
– PE is beyond reach.
– At 611, it is well placed between 52 Weeks high of
727 and low of 505.
– Shall BUY!

12. Thank You!!