A Study On Financial Performance Analysis of HDFC Limited: WWW - Aensi.in

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A study on financial performance analysis of HDFC limited

Dr. D. Pathma Priya
Assistant Professor,
Department of Commerce,
SNMV College of Arts and Science, Coimbatore
Abstract
Finance is the master key which provides access to all the sources for being employed in
manufacturing and merchandising activities. Financial performance is crucial for taking financial
decisions related to planning and control. Financial performance evaluation has been done on the
basis of some selected parameters like liquidity, solvency and profitability ratios for the period from
2013-2014 to 2017-2018. HDFC is one of the largest private sector institutions.Keeping the above
points in mind, the researcher has an attempt to study the financial performance of the HDFC Ltd and
offer suggestions for the improvement of efficiency in the Company.
Key words – Financial performance, Ratio Analysis, Housing Finance.
1. Introduction
Finance is the master key which provides access to all the sources for being employed in
manufacturing and merchandising activities. Financial performance is crucial for taking financial
decisions related to planning and control. Financial performance evaluation has been done on the
basis of some selected parameters like liquidity, solvency and profitability ratios for the period from
2013-2014 to 2017-2018. HDFC is one of the largest private sector institutions.
2. Review of Literature
Thenmozhi S (2010), in her research thesis entitled “Capital Structure, Productivity and
Profitability of select Housing Finance Institutions in India” has focused on financial and operational
performance of housing finance institutions. The statistical tools like summary statistics, discriminate
function analysis, Stochastic Frontier analysis and Altman’s Z-Score analysis were used for this
purpose. The result of the study has revealed the fact that the select housing finance institutions have
performed well in terms of financial and operating efficiency. The study has suggested that effective
profit planning is to be done by the select housing finance institutions to improve their profitability
position.
Guruswamy (2012) conducted a comparative analysis of selected HFCs in India for a sample
of four housing finance companies i.eHousing Development Finance Corporation Ltd.,LIC Housing
Finance Ltd., Can Fin Homes Ltd., and Vysya Bank Housing Finance Ltd using a secondary data for a
period of 10 years from 1991-92 to 2000-2001. The analysis of this based on rankings leads to
conclude that it was LIC Housing Finance Ltd., and Housing Development Finance Corporation Ltd
stood as an excellent housing finance company having the real competition in the housing
financefield.
AbishiekKesari(2012) in his study “Service quality of HDFC bank (2012)]” has concluded
the responsiveness, assurance and reliability are the critical dimensions of service quality of HDFC
bank and they are directly related to overall service quality. From this study that in the days of
301 The research journal of social sciences April 2019 volume 10 number 4
www.aensi.in /Index in Cosmos ISSN 0025-1348 (P), 2456-1356 (O) UGC APPROVED
intense competition, superior service is the only differentiator left before the bank banks to attract,
retain and partner with the customers. Superior service quality enables a firm to differentiate itself
from its competition, gain a sustainable completive advantage, and enhance efficiency. Thus
improving service quality leads to the customer satisfaction and ultimately to customerloyalty.
3. Objectives of the Study

The following are the main objectives of present study
1. To study and analyse the financial performance of HDFC Ltd for the period of five years,
so to say, 2013-2014 to 2017-2018.
2. To offer suggestions based on findings of the study.
4. Scope of the Study
This study covers an analysis of the overall performance of the company with the help of
financial ratios this study is purely from the management point of view and not from the workers point
of view.
5. Methodology
This study is entirely based on secondary data. The reports of the case unit for the past five
years from 2013-2014 to 2017-2018constitute, it is the basis of the study. The gaps in the secondary
data were filled up from the official records of the case unit. To supplement, the information have
been collected from related books, journals and internet.
6. Limitations of the Study
1. The study is based on the secondary data all the limitations of secondary data are also
applicable to this study.
2. The findings of the study are applicable only for the period of five years, i.e., from
2013-2014 to 2017-2018 only ratios are calculated to analysethe data relating to
financial performance.
7. Frame Work of Analysis
Financial performance of the housing development finance corporation limited has been
analyzed with the help of ratio analysis, the financial performance ratios are calculated. The
calculated ratios are presented in the form of table.
8. 1. Solvency Analysis
It is extremely essential for a firm to be able to meet its obligations as they become due in
both short-run and long-run. Liquidity (short-term solvency) ratios measure the firm’s ability to meet
current obligations. In fact, analysis of liquidity and long-term solvency needs the preparation of cash
budgets and cash and fund flow statements, but liquidity ratios by establishing a relationship
between cash and other current assets to current obligations provided a quick measure of liquidity.
The solvency ratios express the company’s capability and soundness to meet its liabilities out of its
assets.
8.1.(i).Current Ratio
Current ratio shows the relationship between the current assets and current liabilities. This
ratio is measure of the firm’s short term solvency. This ratio according to accepted standards or idle
ratio should be 2:1. Whereas higher the Current Ratio greater the margin of safety and vice versa.
The current ratio of the select company has been exhibited.
Current Assets
Current Ratio =--------------------------------
Current Liabilities
Table –1
Current ratio
S. No. Year Current Assets Current Liabilities Ratio

( Rs. in crores) (Rs. in crores) (in percentages)
1. 2013-2014 7800.04 81224.43 0.096
2. 2014-2015 3410.83 87931.86 0.038
3. 2015-2016 5449.35 98980.23 0.055
4. 2016-2017 6428.28 102164.98 0.062
5. 2017-2018 1480.98 118030.83 0.013
The above Table.1 indicates that the Current Assets to Current Liabilities Ratio for the year
2013-2014 was0.096 per cent and for the year 2014-2015 it was 0.038per cent and for the year 2015-
2016 was 0.055per cent, followed by 0.062and 0.013per cent for the years 2016-2017 and 2017-2018
respectively.
The ratio is high (0.096 per cent) in the year 2013-2014 and low in the year 2017-2018 (0.013
per cent) when compared with the other years.
8.1. (ii). Debt-Equity Ratio
This is comparison between the outsider’s debts and shareholders’ funds. The debt includes
all outsiders funds like debentures, long term loans say from financial institutions and the term Equity
includes share capital both equity and preference shareholders’ funds. The standard norm of this
ratio is 2:1 in general the lower the ratio, the higher the degree of protection enjoyed by the
creditors.
Total Debt
Debt Equity Ratio = -----------------------------------------
Shareholders’ Funds
Table –2
Debt equity ratio
S. No. Year Total Debt Shareholders’ Funds Ratio

(Rs. in crores) (Rs. in crores) (in percentages)
1. 2013-2014 112523.79 27955.19 4.025
2. 2014-2015 130860.05 30969.97 4.225
3. 2015-2016 150867.13 34121.06 4.416
4. 2016-2017 192192.56 39645.38 4.847
5. 2017-2018 216966.87 61402.54 3.534
The above Table.2 shows that the Debt-Equity Ratio for the year 2013-2014 was 4.025 per cent
and for the year 2014-2015 it was 4.225 per cent and for the year 2015-2016 is 4.416 per cent, followed
by 4.847 and 3.534 per cent for the years 2016-2017 and 2017-2018 respectively.
8.1.(iii).Proprietary Ratio
Proprietary ratio indicates a relationship between net worth and total assets. The standard
norm of this ratio is 1:3 times i.e., 1/3 of the total assets should be acquired by shareholders funds and
the other 2/3 rd of the assets should be financed by outsiders funds.
ProprietaryRatio = ----------------------------------
Total Assets
Table 3
Proprietary ratio
S. No. Year Total
Shareholders’ Funds Assets Ratio
(Rs. in crores) (Rs. in crores) (in Percentages)
1. 2013-2014 27955.19 140478.98 0.198
2. 2014-2015 30969.97 161830.02 0.191
3. 2015-2016 34121.06 184808.19 0.184
4. 2016-2017 39645.38 231837.94 0.171
5. 2017-2018 61402.54 278369.41 0.220

The above Table.3 shows that the Proprietary Ratio for the year 2013-2014 was 0.198 per cent
and for the year 2014-2015 it was 0.191per cent and for the year 2015-2016is 0.184 per cent, followed
8.1. (iv). Fixed Assets to Networth Ratio
The ratio of fixed assets to net worth indicates the extent to which shareholders funds are
sunk in to the fixed assets. Generally, the purchased of fixed assets should be financed by
shareholders, equity including reserves, surpluses and retained earnings.
Fixed Assets
Fixed Assets to Networth Ratio = ---------------------------------
Total Shareholders’ Funds
Table –4
Fixed assets to net worth ratio
S. No. Year Fixed Assets Total Shareholder’s Funds Ratio
(Rs. in crores) (Rs. in crores) (in Percentages)
1. 2013-2014 132678.94 27955.19 4.746
2. 2014-2015 158419.19 30969.97 5.115
3. 2015-2016 179358.84 34121.06 5.256
4. 2016-2017 225409.66 39645.38 5.685
5. 2017-2018 276888.43 61402.54 4.509

The above Table.4 shows that the Fixed Assets to Net Worth Ratio for the year 2013-2014 was
4.746 per cent and for the year 2014-2015 it was 5.115 per cent and for the year 2015-2016 is 5.256 per
cent, followed by 5.685 and 4.509 per cent for the years 2016-2017 and 2017-2018 respectively.
8.1. (v). Current Assets to Networth Ratio
The Ratio of current assets to net worth may be defined as the relationship between current
assets to shareholders funds. Every business concern should maintain adequate funds in current
assets to meet their short-term obligations and at the same time it has to keep the good amount of
fixed assets which is sufficient to meet long term obligations.
Current Assets
Current Assets to Net worth Ratio = ----------------------------
Table - 5
Current assets to networth ratio
S. No. Year Current Shareholders’ Funds Ratio
Assets (Rs. in crores) (in percentages)
(Rs. in crores)
1. 2013-2014 7800.04 27955.19 0.279
2. 2014-2015 3410.83 30969.97 0.110
3. 2015-2016 5449.35 34121.06 0.159
4. 2016-2017 6428.28 39645.38 0.162
5. 2017-2018 1480.98 61402.54 0.024

Source: Balance Sheet and Profit & Loss Account of HDFC Ltd.
The above Table 3.5 shows that the Current Assets to Net Worth Ratios for the year 2013-2014
was 0.279 per cent and for the year 2014-2015 it was 0.110 per cent and for the year 2015-2016 is
0.159 per cent, followed by 0.162 and 0.024 per cent for the years 2016-2017 and 2017-2018
respectively.
8.2. Profitability Analysis
Any company should earn profits to survive and grow over a long period of time. Profits are
essential, but it would be wrong to assume that every action initiated by management of a company
should be aimed at maximizing profits, irrespective of social consequences. This is possible only
when the company earns enough profits. Generally two major types of profitability ratios are
calculated.
I. Profitability in relation to Turnover

II. Profitability in relation to Investment
I.Profitability of in Relation to Turnover
8.2. (i). Gross profit ratio
Gross profit is the amount of revenue that a company brings in before subtracting the
expenses associated with that revenue. It’s different from operations profit which is actually gross
profit minus operating expenses.
Gross Profit
Gross Profit Ratio = -------------------- x100
Total Income
Table - 6
Gross profit ratio
S. No. Gross Profit Total Income Ratio
Year (Rs. in crores) (Rs. in crores) (in percentages)
1. 2013-2014 628.63 24197.67 2.597
2. 2014-2015 1027.76 27470.86 3.740
3. 2015-2016 1051.11 30956.57 3.395
4. 2016-2017 1066.86 33159.60 3.217
5. 2017-2018 1102.79 38911.48 2.830

The above Table.6 shows that the Gross Profit Ratio for the year 2013-2014 was 2.597 per cent
and for the year 2014-2015 it was 3.740 per cent in for the year 2015-2016 is 3.395 per cent and
followed by 3.217 and 2.830 per cent for the years 2016-2017 and 2017-2018 respectively.
The ratio is high (3.740 per cent) in the year 2014-2015 and low in the year 2013-2014
(2.597per cent) when compared with the other years.
8.2. (ii). Net Profit Ratio

Net profit is obtained when operation expenses, interest and taxes are subtracted from the
gross profit. Net profit margin ratio establishes a relationship between net profit and Total income
and indicated management’s efficiency in manufacturing, administering and selling the products this
ratio is the overall measure of the firm’s ability to earn each rupee total income into net profit.
Net profit
Net Profit Ratio =----------------------x100
Total Income
Table - 7
Net profit ratio
Net Profit Total Income Ratio
S. No. Year (Rs. in crores) (Rs. in crores) (in percentages)
1. 2013-2014 280.48 24197.67 1.159
2. 2014-2015 676.96 27470.86 2.464
3. 2015-2016 664.53 30956.57 0.021
4. 2016-2017 642.34 33159.60 1.937
5. 2017-2018 644.50 38911.48 1.656

The above Table 3.7 shows that the Net Profit Ratios for the year 2013-2014 was 1.159 per cent
and for the year 2014-2015 it was 2.464 per cent and for the year 2015-2016 is 0.021 per cent, followed
8.2. (iii). Operating Profit Ratio
This ratio establishes the relationship between Operating Profit and Total Income. Operating
profit is the Net profit after depreciation but before interests and taxes.
Operating Profit
Operating Profit Ratio = ---------------------- x100
Total Income
Table - 8
Operating profit ratio
S. No. Year Operating profit Total Income Ratio
(Rs. in crores) (Rs. in crores) (in percentages)
1. 2013-2014 23447.42 24197.67 96.89
2. 2014-2015 26559.31 27470.86 96.68
3. 2015-2016 29485.44 30956.57 95.25
4. 2016-2017 30630.26 33159.60 92.37
5. 2017-2018 33443.55 38911.48 85.94

The above Table 3.8 shows that the Operating Profit Ratios for the year 2013-2014 was 96.89
per cent and for the year 2014-2015 it was 96.68per cent and for the year 2015-2016 is 95.25 per cent,
followed by 92.37 and 85.94 per cent for the years 2016-2017 and 2017-2018 respectively.
II. Profitability in Relation to Investment
8.2. (iv). Return on Shareholders’ Funds Ratio
Investment represents pool of funds supplied by shareholders and lenders, while Profit After
Tax (PAT) represents residual income of shareholders; therefore, it is conceptually unsound to use
PAT in the calculation of ROI. It is more appropriate to use one of the following measures of ROI for
comparing the operating efficiency of firms.
Net profit
Return on Shareholders’ Funds Ratio = ----------------------- x100
Table - 9
Return on shareholders’ funds ratio
S. No. Year Net Profit Shareholders’ Funds Ratio
(Rs .in crores) (Rs. in crores) (in percentages)
1. 2013-2014 280.48 27955.19 1.000
2. 2014-2015 676.96 30969.97 2.185
3. 2015-2016 664.53 34121.06 1.947
4. 2016-2017 642.34 39645.38 1.620
5. 2017-2018 644.50 61402.54 1.049

The above Table.9 shows that the Return on Shareholders’ Funds Ratios for the year 2013-2014
was 1.000 per cent and for the year 2014-2015 it was 2.185 per cent and for the year 2015-2016 is
1.947 per cent, followed by 1.620 and 1.049 per cent for the years 2016-2017 and 2017-2018
respectively.
The ratio is high (2.185 per cent) in the year 2014-2015and low in the year 2013-2014 (1.000
8.2. (v). Return on Total Assets Ratio

The ratio of return on total assets represents the capacity of income level over total assets of
the firm.
Net Profit
Return on Total Assets Ratio = ----------------- x100
Total Assets
Table –10
Return on total assets ratio
S. No. Year Net Profit Total Assets Ratio
( Rs. in crores) ( Rs. in crores) (in percentages)
1. 2013-2014 280.48 140478.98 0.199
2. 2014-2015 676.96 161830.02 0.418
3. 2015-2016 664.53 184808.19 0.359
4. 2016-2017 642.34 231837.94 0.277
5. 2017-2018 644.50 278369.41 0.231

The above Table.10 shows that the Return on Total Assets Ratio for the year 2013-2014 was
0.199 per cent for the year 2014-2015 it was 0.418 per cent and for the year 2015-2016 is 0.359 per
cent, followed by 0.277 and 0.231 per cent for the years 2016-2017 and 2017-2018 respectively.
9.Summary of Findings
The findings of the present study have been summarized and are presented below
1. CURRENT RATIO is high (0.096 per cent) in the year 2013-2014 and low in the year
2017-2018 (0.013 per cent) when compared with the other years.
2. DEBT-EQUITY RATIO is high (4.847 per cent) in the year 2016-2017 and low in the
year 2017-2018 (3.534 per cent) when compared with the other years.
3. PROPRIETARY RATIO is high (0.220 per cent) in the year 2017-2018 and low in the
4. FIXED ASSETS to NET WORTH RATIOis high (5.685 per cent) in the year 2016-2017
and low in the year 2017-2018 (4.509 per cent) when compared with the other years.
5. CURRENT ASSETS to NET WORTH RATIO is high (0.279 per cent) in the year 2013-
2014 and low in the year 2017-2018 (0.024 per cent) when compared with the other
years.
6. GROSS PROFIT RATIO is high (3.740 per cent) in the year 2014-2015 and low in the
7. NET PROFIT RATIO is high (2.464 per cent) in the year 2014-2015 and low in the year
2015-2016 (0.021 per cent) when compared with the other years.
8. OPERATING PROFIT RATIO is high (96.89 per cent) in the year 2013-2014 and low in
the year 2017-2018 (85.94 per cent) when compared with the other years.
9. RETURN ON SHAREHOLDERS’ FUNDS RATIOis high (2.185 per cent) in the year 2014-
2015and low in the year 2013-2014 (1.000 per cent) when compared with the other
years.
10. RETURN ON TOTAL ASSETis high (0.418 per cent) in the year 2014-2015 and low in
the year 2013-2014 (0.199 per cent) when compared with the other years.
10.Suggestions
1. The overall liquidity position of HDFC Ltd has been fluctuated through the period of study
but it always maintain sufficient funds which are more than enough to meet short term
obligations of the concern.
2. The long term solvency of the selected unit is more than adequate and HDFC is highly
depends on outsiders funds rather than equity funds. Hence the company is better to
concentrate to get back the funds from debt to equity funds and also reduce and long
term financial obligations.
3. This study signifies HDFC Ltd have to provide more housing loans to the people of India
for the development of the Nation.
11. Conclusion
In this study, the researcher has analyzed the financial performance of HDFC Ltd. In this connection,
she has used many ratios, which include liquidity, solvency and profitability ratios. It is found that the
financial performance of the HDFC Limited is at satisfactory level.
References
 Thenmozhi (2010), “Capital Structure, Productivity and Profitability of select Housing

Finance Institutions in India”, Unpublished Ph.D., Thesis, Bharathiar University.
 Guruswamy (2012) ,”Comparative Analysis of Selected Housing Finance Companies in
India”, International Journal of Research in Commerce, It & Management, Vol. 2, ISSUE NO.
1,2012.
 Abishiekkesari (2012) in his study “Service quality of HDFC bank” was published in the
website www.scribd.com.

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www.aensi.

in /Index in Cosmos ISSN 0025-1348 (P), 2456-1356 (O) UGC APPROVED

A study on financial performance analysis of HDFC limited

Key words – Financial performance, Ratio Analysis, Housing Finance.

3. Objectives of the Study

S. No. Year Current Assets Current Liabilities Ratio

1. 2013-2014 7800.04 81224.43 0.096

2. 2014-2015 3410.83 87931.86 0.038

3. 2015-2016 5449.35 98980.23 0.055

4. 2016-2017 6428.28 102164.98 0.062

5. 2017-2018 1480.98 118030.83 0.013

8.1. (ii). Debt-Equity Ratio

S. No. Year Total Debt Shareholders’ Funds Ratio

1. 2013-2014 112523.79 27955.19 4.025

2. 2014-2015 130860.05 30969.97 4.225

3. 2015-2016 150867.13 34121.06 4.416

4. 2016-2017 192192.56 39645.38 4.847

5. 2017-2018 216966.87 61402.54 3.534

1. 2013-2014 27955.19 140478.98 0.198

2. 2014-2015 30969.97 161830.02 0.191

3. 2015-2016 34121.06 184808.19 0.184

4. 2016-2017 39645.38 231837.94 0.171

5. 2017-2018 61402.54 278369.41 0.220

8.1. (iv). Fixed Assets to Networth Ratio

1. 2013-2014 132678.94 27955.19 4.746

2. 2014-2015 158419.19 30969.97 5.115

3. 2015-2016 179358.84 34121.06 5.256

4. 2016-2017 225409.66 39645.38 5.685

5. 2017-2018 276888.43 61402.54 4.509

8.1. (v). Current Assets to Networth Ratio

1. 2013-2014 7800.04 27955.19 0.279

2. 2014-2015 3410.83 30969.97 0.110

3. 2015-2016 5449.35 34121.06 0.159

4. 2016-2017 6428.28 39645.38 0.162

5. 2017-2018 1480.98 61402.54 0.024

8.2. Profitability Analysis

I. Profitability in relation to Turnover

I.Profitability of in Relation to Turnover

8.2. (i). Gross profit ratio

1. 2013-2014 628.63 24197.67 2.597

2. 2014-2015 1027.76 27470.86 3.740

3. 2015-2016 1051.11 30956.57 3.395

4. 2016-2017 1066.86 33159.60 3.217

5. 2017-2018 1102.79 38911.48 2.830

8.2. (ii). Net Profit Ratio

1. 2013-2014 280.48 24197.67 1.159

2. 2014-2015 676.96 27470.86 2.464

3. 2015-2016 664.53 30956.57 0.021

4. 2016-2017 642.34 33159.60 1.937

5. 2017-2018 644.50 38911.48 1.656

8.2. (iii). Operating Profit Ratio

1. 2013-2014 23447.42 24197.67 96.89

2. 2014-2015 26559.31 27470.86 96.68

3. 2015-2016 29485.44 30956.57 95.25

4. 2016-2017 30630.26 33159.60 92.37

5. 2017-2018 33443.55 38911.48 85.94

II. Profitability in Relation to Investment