Educational Equity Research Report

HDFC BANK LTD

(NSE: HDFCBANK)
Target: N/A Holding Period: N/A Rec. N/A

About the Business Company Snapshot

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in Mkt Cap ₹ 10,94,912.00
principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. HDFC High/Low ₹1758 / ₹1363
Bank is a publicly held banking company, the bank was incorporated in August 1994 in the name of Div. Yield 1.32%
'HDFC Bank Limited', with its registered office in Mumbai, India. It is engaged in providing a range of Stock P/E 16.10x
banking and financial services including retail banking, wholesale banking and treasury operations. It is ROCE 5.73%
promoted by HDFC Ltd. which has 19.32% stake as on September 30, 2020. Currently, HDFC Bank Ltd. ROE 15.94%
(HBL) is the largest private sector bank in India.

Financial Profile Mar-20 Mar-21 Mar-22 Mar-23 Shareholding Pattern

Revenue ₹ 1,22,189.29 ₹ 1,28,552.40 ₹ 1,35,936.41 ₹ 1,70,754.05 Promoters 0.00%
EBIT ₹ 1,01,609.05 ₹ 1,03,428.75 ₹ 1,11,138.44 ₹ 1,41,623.80 FIIs 52.31%
PBT ₹ 38,194.86 ₹ 42,796.15 ₹ 50,873.38 ₹ 61,498.39 DIIs 30.54%
Tax ₹ 10,898.59 ₹ 10,939.38 ₹ 12,722.48 ₹ 15,349.69 Public 16.98%
Net Profit ₹ 27,296.27 ₹ 31,856.77 ₹ 38,150.90 ₹ 46,148.70
NPM 22% 25% 28% 27% Research Analyst
Key Points about the Company Dnyanesh Nikumbh
-International Footprints Student
The Bank has offices and branches in Bahrain, Hong Kong, UAE, and Kenya where Financial Ratios
they offer NRI clients Offshore Deposits, Bonds, Equity, Mutual Funds, Treasury, and ROE 15.94%
ROCE 5.73%
Structured products offered by third parties from Bahrain Branch. As on March 31,
ROA 1.82%
2022, Balance Sheet size of International Business was US$7.66 Billion.
NPM 28.07%
-PAN India Presence GPM 100.00%
The Bank's network includes 21,683 Banking outlets comprising Branches (6342) and Div Yeild 1.32%
Business Correspondents (15,431), ATMs/ Cash Deposits, and Withdrawal Machines EBIT Margin 80.52%
(18,130) spread across India as of FY22.

-HDFC Bank is the second largest collector of direct taxes.

-Market leader in almost every asset category with best-in-class portfolio quality.

-Fun fact- HDFC Bank was the first bank in India to launch an International Debit Card
in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card
as well.
Quarterly Performace
Volume Growth
- Revenue: Jumped 112.51% year-over-year to ₹1,15,015.51 Cr, and grew
6.92% compared to the previous quarter.
- Net Profit: Increased 35.91% year-over-year to ₹17,257.87 Cr, and grew
2.66% compared to the previous quarter.
- Net Interest Income grew 4.0% from the previous quarter and 23.9% year-
over-year, exceeding market expectations.

Other Information
-Retail issuing cards: Witnessed robust growth of 30% YoY and 10% QoQ.
-Retail deposits: Grew by Rs. 38,000 crores, constituting 83.5% of total
deposits.
-Retail advances: Grew 20% YoY and 4% QoQ, driven by strong
performances in home loans and personal loans.
 . .

Industry Overview
Competior Overview

-ICICI Bank: Offers similar financial services to HDFC Bank, with a strong

-State Bank of India (SBI): Largest bank in India, with a vast network of
branches and a strong presence in rural areas. However, it may be perceived as
less efficient compared to private banks.

-Other public sector banks like Bank of Baroda, Punjab National Bank, etc.,
also compete with HDFC Bank in specific segments like loans and deposits,
but their overall market share is lower.

-Regulatory landscape: The Indian banking industry is heavily regulated by the

Reserve Bank of India (RBI), which ensures financial stability and protects
consumer interests. Regulations cover areas like capital adequacy, liquidity,
and risk management.

-Diversified business: HDFC Bank offers a wide range of banking and

financial services, including retail banking, wholesale banking, and treasury
operations.

-Challenges: Despite its strong position, the bank faces challenges like intense
competition, managing credit risk, and adapting to the evolving regulatory
landscape.
 HDFC Group Companies

HDFC Bank, HDFC Life Insurance, HDFC Ergo General Insurance,

HDFC Asset Management Company, and HDFC Credila Financial
Services are some of the group's key entities. These companies offer
a wide array of financial products and services, catering to various
individual and business needs across life stages. With its strong brand
presence and diverse offerings, the HDFC Group remains a major
player in the Indian financial landscape.
 Management Voice

-Focus on customer-centricity and digital transformation: The management

emphasizes providing a seamless banking experience through digital channels
while maintaining a human touch for personalized service.

-Driving financial inclusion: Expanding the reach of banking services to

underserved communities is a key priority.

-Commitment to responsible banking: The management highlights its

commitment to sustainable practices and ethical conduct.

-Innovation and agility: Adapting to evolving customer needs and industry

trends through continuous innovation is crucial.

-Empowering employees: Fostering a culture of learning and development to

create a highly skilled and motivated workforce.
 Detailed Ratio Analysis
Financial Ratios Mar-20 Mar-21 Mar-22 Mar-23
Liquidity Ratios
Current Ratio 1.23x 1.55x 1.71x 1.94x
Quick Ratio 1.23x 1.55x 1.71x 1.94x
Cash Ratio 1.23x 1.55x 1.71x 1.94x

Solvency Ratio
Debt to Equity 7.56x 7.20x 7.22x 7.39x
Debt to Capital 0.88x 0.88x 0.88x 0.88x
Financial Leverage 8.96x 8.58x 8.58x 8.74x
Debt to EBITDA 13.12x 14.61x 16.06x 15.10x
Interest Coverage 1.64x 1.75x 1.90x 1.82x

Efficency Ratio
Inventory Turnover , , , ,
Fixed Asset Turnover 25.59x 24.49x 21.13x 20.25x
Total Asset turnover 0.08x 0.07x 0.06x 0.07x

Profitability Ratio
Return on 15% 15% 15% 16%
Return on 7% 6% 5% 6%
Return on Asset 2% 2% 2% 2%

Margin Ratio
Gross Margin 100% 100% 100% 100%
EBITDA Margin 85% 83% 80% 82%
EBIT Margin 84% 82% 79% 81%
PBT Margin 33% 31% 33% 37%
 Dupont Analysis
Financial Ratios Mar-20 Mar-21 Mar-22 Mar-23
Dupont Analysis for ROE
PAT Margin/Net profit Margin
21.34% 22.34% 24.78% 28.07%
Total Asset turnover ratio 0.08x 0.07x 0.06x 0.07x
Financial Leverage 8.96x 8.58x 8.58x 8.74x
Return on Equity 14.79% 13.69% 13.62% 16.56%

Dupont Analysis for ROA

PAT Margin/Net Profit Margin
21.34% 22.34% 24.78% 28.07%
Total Asset Turnover Ratio 0.08x 0.07x 0.06x 0.07x
Return on Asset 2% 2% 2% 2%

ROE Trend ROA Trend

20.00% 5%
4%
15.00%
3%
2%
10.00%
1%
5.00% 0%
1 2 3 4 1 2 3 4

Decomposing the ROE for HDFC BANK LTD

HDFC Bank's profitability (ROE) improved from 14.79% in Mar-20 to 16.56%
in Mar-23. While profit margins increased significantly (21.34% to 28.07%), a
slight decline in asset turnover (0.08x to 0.07x) was offset by a small increase
in leverage (8.96x to 8.74x). This suggests that the bank is making better use
of its equity and generating more profit per unit of asset, indicating a
potentially positive outlook for future profitability.

Research By-
Dnyanesh Nikumbh