Category Archive : Stock Performance Analysis & Updates

HDFC Bank – Company Performance (Q32019 Results Highlight)

The Q3 results of HDFC Bank were released/declared on 21st January 2019.

Q3 Results Highlights

Parameters (In Rs. Crores) Q3FY18-19 Q3FY17-18 YoY Growth
Total Income 30,811 24,450 26.00%
Net Interest Income (NII) 12,576 10,314 21.90%
Net Profit 5,585 4,642 20.30%
Total Deposits 8,52,500 6,99,000 22%
Total Advances 7,80,000 6,31,000 23.50%
Total Balance Sheet 11,68,000 9,49,000 23%
  • Total Income is the interests received on the advances/loans given by the bank. Other income sources are Mutual Fund distribution income, commission income, insurance distribution, etc. A very healthy growth even with a huge base. The same growth rate has been maintained in the last 8-10 years.
  • The banks receive interest on the advances given out. But to give out these advance bank need deposits like Fixed Deposits, Certificate of Deposits, Savings Account or Current Account. Here, the bank has to pay the interests. So, Net Interest Income is the total interest income minus the amount of interest amount paid out. Here also, there is very nice growth
  • The amount left after deducting all the expense, liabilities, interests and taxes from the total income is the Net profit of the bank. A healthy growth can be seen here too. And this has been a consistent performance of the bank in the last 7-10 years.
  • Total Deposits is the money that came in to the bank in the form of savings accounts, current accounts or Fixed Deposits. The deposits growth is also very good as expected
  • Total Advances is the amount of loans given out. The growth in the loans is also significant
  • Total Balance sheet is where all the assets are included. The increase in the balance sheet size is also of the same growth range.

Net Interest Margin (NIM)

Net Interest Margin is interest on advances given out minus the deposits received divide by the total amount of money invested.

HDFC Bank has a NIM of 4.3%.As it is a retail bank, 55% of the business of the bank is retail business and the other 45% is the wholesale business. Thus, the major dependency of the bank is on the retail business. In retails business, their major income is from the deposits from like savings account, current account, etc. And that is why the NIM of HDFC bank compared to the other banks is on the lower side.

Capital Adequacy Ratio (CAR)

The CAR of HDFC Bank is 17.3%.

This number is very healthy when you compare it with the balance sheet size.

Gross NPA

The Gross NPA of HDFC Bank is 1.38%.

This a little disappointing number. The provisioning done by the bank for their bad assets has increased by 63%. But when u compare that with the parameters mentioned above, then that does not seem to be that big of a number. In last year same quarter, Gross NPA was 1.29%. So, definitely there has been an increase.

Net NPA

The Net NPA of HDFC bank is 0.41%

In last year same quarter, Net NPA was 0.42%. So, there is a decrease here in the YoY comparison. Recovery has happened of their bad loans.

Current Account-Savings Account Proportion (CASA)

The proportion of CASA over the deposits is of 41%.

This number has a direct relation with Net Interest Margin. Where the proportion of CASA is high, there the NIM is on the higher side.

Total Branches

HDFC Bank has a total of 4,963 branches.

Summary

  • Overall, all the numbers of HDFC Bank are very healthy
  • The main numbers are of the Net Profits, which are very good showing growth of almost 20.3% YoY
  • HDFC Bank is the most favourite stock of any Mutual funds vs Direct Equity or FII’s because of its continued strong numbers of Total Income and Net Profit

Notes: –

  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • No suggestions are been made as to whether this is a good or bad company/stock.
  • No suggestions are also being made to go and immediately buy the stocks of this company or go invest in the stock market.

Reliance Industries Ltd – Q3 Results Update & Analysis (Reliance Company Performance Review)

The Q3 results of Reliance Industries Limited were released/declared on 17th January 2019.

Reliance Industries is a huge company and is expected to be sustained for the long term. Reliance Group is a very diversified company and are diversifying continuously. They are also able to build and sustain cash flow generating businesses.

Main Businesses: –

  1. Refining and Marketing
  2. Petrochemicals
  3. Oil & Gas (Exploration and Production)
  4. Organized Retail
  5. Media
  6. Digital Services

Highlights of the Q3 Results

  • Q3 2018 Consolidated Revenue of Rs. 1,71,336 crores
    • Grew by 55.9% on YoY basis from last year’s same quarter
    • Grew by 9.6% on QoQ basis from last this year’s previous quarter
  • Q3 2018 Consolidated Net Profit of Rs. 10,251 crores
    • Grew by 8.8% on YoY from last year’s same quarter
    • Grew by 7.7% on QoQ basis from last this year’s previous quarter
  • Q3 2018 Consolidated Profit Before Depreciation, Interest & Tax (PBDIT) of Rs. 23,801 crores
    • Grew by 20.0% on YoY from last year’s same quarter
    • Grew by 6.4% on QoQ basis from last this year’s previous quarter
  • All the QoQ growths are very good.
  • Reliance Industries Ltd. has become the first country in India whose quarterly Net Profit had went above the 10,000. This means that one can expect a net profit of almost Rs. 40,000 crores (approx. $6 billion) from the company. This is a very big achievement for Reliance Industries.

Business Segment-wise Performance

  1. Refining & Marketing Business
    1. This is the main business of Reliance and the biggest cash generator for them
    2. Q3 2018 Segmental Revenue of Rs. 1,11,738 crores
      1. Grew by 47.3% on YoY basis from last year’s same quarter (Rs. 75,865 crores)
      2. Grew by 13.1% on QoQ basis from last this year’s previous quarter (Rs. 98,760 crores)
    3. Very good numbers here
  2. Petrochemicals Business
    1. This another cash source of the company
    2. Q3 2018 Segmental Revenue of Rs. 46,246 crores
      • Grew by 37.1% on YoY basis from last year’s same quarter (Rs. 33,726 crores)
      • Grew by 5.7% on QoQ basis from last this year’s previous quarter (Rs. 43,745 crores)
    3. Q3 2018 Segmental EBIT of Rs. 8,221 crores
      • Grew by 42.9% on YoY basis from last year’s same quarter (Rs. 5,753 crores)
      • Grew by 1.2% on QoQ basis from last this year’s previous quarter (Rs. 8,120 crores)
    4. Very commendable numbers
  3. Oil & Gas (Exploration and Production) Business
    1. This is business segment is that big contributor to the company
    2. Q3 2018 Segmental Revenue of Rs. 1,182 crores
      • Down by 27.5% on YoY basis from last year’s same quarter (Rs. 1,631 crores)
      • Grew by 10.6% on QoQ basis from last this year’s previous quarter (Rs. 1,322 crores)
    3. Negative Numbers here.
    4. The reason stated by the company is that the domestic production was down by 33% YoY whereas production in US shale operations declined by 37%.
    5. The meaning of this is that, in the last quarter (Oct-Dec) crude prices started dropping which had an effect on the company. When crude prices fall, the revenues and profitability are also affected.
  4. Organized Retail Business
    1. Reliance is giving a lot of focus to this business segment, because they know that in the nest 10-20 years oil will have very less dependency. So, the level of profits currently earned from petrochemicals or oil refining will not be earned in the future, as alternative energy resources will gain market.  And that is why Reliance is developing varied business.
    2. Q3 2018 Segmental Revenue of Rs. 35,577 crores
      • Grew by 89.3% on YoY basis from last year’s same quarter (Rs. 18,798 crores)
      • Grew by 9.7% on QoQ basis from last this year’s previous quarter (Rs. 32,436 crores)
    3. Q3 2018 Segmental EBIT of Rs. 1,512 crores
      • Grew by 210.5% on YoY basis from last year’s same quarter (Rs. 487 crores)
      • Grew by 21.5% on QoQ basis from last this year’s previous quarter (Rs. 1,244 crores)
    4. Excellent YoY growths.
    5. Compared to their competitors like Avenue Supermarts (D-Mart) Share Price Fallthey are performing very brilliantly. (Avenue Supermarts (D-Mart) Share Price Fall had a little disappointing Q3 result.) it should be noted that Reliance is making huge cash investments here, unlike Avenue Supermarts (D-Mart) Share Price Fall which makes very calculated investments. This so because Avenue Supermarts (D-Mart) Share Price Fall does want to take on much debt, but as Reliance is cash rich, it is easy for them to raise debt. Thus, both the companies cannot be compared directly.
  5. Media Business
    1. Network18 Media & Investments Limited
    2. A smaller business segment comparatively.
    3. Q3 2018 Segmental Revenue of Rs. 1,524 crores
      • Grew by 316.4% on YoY basis from last year’s same quarter (Rs. 366 crores)
      • Grew by 23.2% on QoQ basis from last this year’s previous quarter (Rs. 1,237 crores)
    4. Not performing very good currently, but with backing of Reliance Industries they will definitely see better days ahead
  6. Digital Services Business
    1. The business of Reliance Jio
    2. Q3 2018 Segmental Revenue of Rs. 12,302 crores
      • Grew by 51.2% on YoY basis from last year’s same quarter (Rs. 8,136 crores)
      • Grew by 12.4% on QoQ basis from last this year’s previous quarter (Rs. 10,942 crores)
    3. Q3 2018 Segmental EBIT of Rs. 2,362 crores
      • Grew by 64.0% on YoY basis from last year’s same quarter (Rs. 1,440 crores)
      • Grew by 15.7% on QoQ basis from last this year’s previous quarter (Rs. 2,042 crores)
    4. Standalone revenue from operations is Rs. 10,383 crores (12.4% QoQ growth)
    5. Standalone Net profit of Rs. 831 crores
    6. Subscriber base of 280.1 million (28 crores). Added 27 million (2.7 crores) people in this quarter.
    7. Average Revenue Per User (ARPU) during the quarter is Rs. 130 per subscription per month. Lower than the last quarter.
    8. A huge jump can be seen in this business.

Summary: –

  • No doubt that the Q3 results are very good.
  • The best part about Reliance Industries Ltd. is that it is a very cash rich company because of which they can make a lot of investments right now, as they have huge reserves available with them. They are obviously taking advantage of this.
  • Reliance Industries Ltd. has main focus on organized retail business and digital services (Jio). In these businesses, reliance may become a huge player in the future, which can also be seen currently.
  • As expected, the stock of the company has received positive reactions from the markets.

Notes: –

  • All the figures have been taken from the Media Release of Reliance Industries Ltd. itself.
  • We are not suggesting to go and immediately buy this stock or invest in the stock market.

Re-Categorization of Stocks in Indian Share Market based on Market Cap (Upgrade and Downgrade)

20 Stocks which have been Re-Categorized (Small Cap to Mid Cap & Mid Cap to Large Cap) in the Indian Stock Exchange in 2019 based on Market Cap

On 1st January 2019, SEBI re-categorized its stocks again. After that some promotions and some demotions have taken place in the large cap, mid cap and small cap companies.

Market Cap Classification

  • Large Cap – Top 100 Stocks based on Last Six Months Average Market Cap
  • Mid Cap – 101-250 Stocks based on Last Six Months Average Market Cap
  • Small Cap – Beyond 250 Stocks

Every six months SEBI releases a new list of this categorized companies, so that the mutual funds can invest according to their categories. That is large cap fund should invest 80% in large cap stocks, multi cap funds can invest across the categorization, mid cap funds should have minimum allocation of 65% in mid cap companies and small cap funds too similarly.

In this new list, some companies have been promoted and some have been demoted based on the average market cap from the period of 1st July 2018 to 31st December 2018.

Companies that got Promoted from Mid Cap to Large Cap

CompanyAvg. Market Cap (Rs. Crore)
Divis Lab34,975
United Breweries33,095
Page Industries32,702
Indiabulls Ventures Ltd31,823
L&T Infotech Ltd30,206
Berger Paints India Ltd29,939
GSK Consumer Healthcare Ltd29,660

The companies on this list used to be mid cap companies earlier which now are large cap companies. These are the average market cap of the companies from the period of 1st July 2018 to 31st December 2018. Though their market now maybe different but these are their average market caps for the above period.

L&T Infotech Ltd gained advantage because of the rupee depreciation rally that took place last year. And the run that IT companies experienced in the last year also benefited L&T Infotech Ltd.

The fluctuations in the crude oil prices has benefited Berger Paints India Ltd. The dollar has dropped from 85 dollars to almost 50 dollars which has helped Berger Paints India Ltd.

The merger of GSK Consumer Healthcare Ltd with Hindustan Unilever Ltd was a very positive news for GSK Consumer Healthcare Ltd.

Companies that got Promoted from Small Cap to Mid Cap

CompanyAvg. Market Cap (Rs. Crore)
Bata India Ltd12,550
Schaeffler India11,412
Alembic Pharma11,047
Aarti Industries10,818
Solar Industries9,834
Mahindra CIE Automotive Ltd9,826
Atul Ltd9,390
Ipca Lab9,312
Relaxo Footwears9,305
Phoenix Mills9,203
Gujarat Flurochemicals9,110
SKF India9,094
Thomas Cook8,856

The companies on this list used to be small cap companies earlier which now are mid cap companies. These are the average market cap of the companies from the period of 1st July 2018 to 31st December 2018. Though their market now maybe different but these are their average market caps for the above period.

Bata India & Relaxo Footwears, both of the huge footwear companies have been promoted. Both the companies have very good focus in India and these companies should be in the radar of any investor.

Now the companies in this list have been opened to up to new investments in them, which may be a very good sign for them as the allocations to these stocks can be increased.

Companies that got Demoted from Large Cap to Mid Cap

  1. Hindustan Aeronautics Ltd
  2. Bharat Forge Ltd
  3. Shriram Transport Finance Company Ltd
  4. Sun TV Network Ltd
  5. Aditya Birla Capital Ltd
  6. BHEL
  7. TVS Motors
  8. Bharat Electronics Ltd

Companies that got Demoted from Mid Cap to Small Cap

  1. Future Consumer Ltd
  2. Reliance Power
  3. Dilip Buildcon
  4. JM Financial Ltd
  5. Prestige Estates Projects
  6. Arvind Ltd
  7. Sun Pharma Advance Research Company
  8. Finolex Cables
  9. Reliance Capital
  10. KRBL
  11. Engineers India
  12. Symphony
  13. TV18 Broadcast
  14. Rain Industries
  15. Avanti Feeds Ltd
  16. Vakranjee Ltd
  17. PC Jeweller Ltd

Bandhan Bank & Gruh Finance Merger Analysis

The merger of Bandhan Bank and Gruh Finance has been announced, but it hasn’t been approved yet. They have given the merger application to the RBI. Will have to wait to see what happens ahead.

Reason behind the Merger

The promoters of the Bandhan bank have to reduce their stake (from 82.3% to 40%). And this is their first try in downsizing their stake. If this merger goes through, then their promoter holding will go down from 82.3% to 61% holding in the merged entity.

Conditions of the Merger

One will get 568 Bandhan bank shares for every 1000 Gruh Finance shares held.

Comparison Between the 2 Merging Entities

ParametersGruh FinanceBandhan Bank
No. of Branches200+938
No. of Employees700+30,000+
Total Loans given (crores)16,66333,373
Deposits (crores)1,51533,869
Capital Adequacy Ratio18.9%32.6%
Gross NPA0.881.3
Return on Assets (ROA)2.57%4.30%
  • Number of branches data is as per their September 2018 results. Bandhan bank will get presence in the west because of Gruh Finance branches, and Gruh Finance will get presence in the east because of Bandhan bank branches. This is a very good synergy between the two.
  • Gruh Finance is a NBFC that is why it has less employees. And Bandhan bank is a full-fledged bank which is why it has so many employees.
  • The advances of Bandhan bank are almost double than those of Gruh Finance. Gruh finance has more market in affordable loans. Plus, Gruh Finance has a very strong experience and a very good system of managing all the aspect regarding to loans. Thus, this will be very valuable to Bandhan bank.
  • As Gruh Finance is a NBFC it faces challenges to raise deposits as it has high cost of deposit. On the other hand, a bank has savings account, current account, etc., which is why their cost of deposit is very less compared to a NBFC. Here, being a bank, Bandhan bank gains advantage.
  • As being a bank, the Capital Adequacy ratio of Bandhan bank is 32.60%, which is very high and also above the limit of the RBI. So, when these entities get merged this ratio will come down.
  • Even after being a NBFC, Gruh Finance has kept its Gross NPA in a very good control. And we all know that NBFC’s faced some issues in the recent past. That time Gruh Finance did not face much issues as compared to other NBFC’s.
  • Assets here are the loans given out by the banks and the NBFC’s. Here, Bandhan bank scores well as cost of raising money is high for Gruh Finance.

Market Capitalization

ParametersGruh FinanceBandhan Bank
Market Cap (in Crore Rs.)19,50058,000
  • Promoter of Bandhan Bank is Ghosh family and their stake in the bank is 82.3%. So, their stake is worth Rs. 47,700 crores (82.3% of 58,000 crores)
  • Promoter of Gruh Finance is Housing Development Finance Corporation (HDFC Ltd.) and their stake in the NBFC is 57.3%. So, their stake is worth Rs. 11,276 crores (57.3% of 19,500 crores)
  • After the merger, the market cap will become 77,500 crore rupees.

Here, the stake of HDFC will be 14.96% in the merged entity, which will be 11,594 crore rupees. And that of Bandhan bank will be 61% which will be 47,275 crore rupees.

According to the new RBI rules, HDFC cannot hold more then 10% in Bandhan bank. But HDFC will have to get their stake down by at least 5%. Will have to see what the RBI approves and permits in this merger.

Final View on this Merger

According to the analysis done above, the ultimate winner in this merger is Housing Development Finance Corporation (HDFC Ltd.).

Why this is so? Because Bandhan bank promoters were directed to reduce their holding and no promoter likes to sell out their stake. If that is done it can also have negative impact. Gruh Finance was an over-valued entity. Its P/E ratio or P/B ratio are very high in comparison with their competitors.

Bandhan bank had to reduce their stake. So, to do so and to also avoid the negative impacts by selling their stake in the market, it decided to merger with Gruh Finance with such high valuations.

HDFC was always questioned as to why they were running 2 entities (HDFC Ltd & Gruh Finance) simultaneously. Because of this HDFC couldn’t enter the affordable housing loans aggressively. HDFC could not use the full potential of Gruh Finance because of restrictions.

In this merger, a lot of desperation can be seen from Bandhan bank as they have to reduce their stake and the deadline was nearing. They had also earlier tried to buy PNB Housing Finance similarly, but it didn’t go through. But here they have given proposal to Gruh Finance by giving them premium valuations. Now will have to wait and watch RBI’s reaction on this.

Therefore, the real winner in this deal is neither Bandhan bank nor Gruh Finance. It is HDFC Ltd.

So, our suggestion to investors will be to keep HDFC Ltd on their radar rather Bandhan bank or Gruh Finance.

HDFC Bank Stock vs Kotak Bank Stock

A comparison between these 2 banks has been presented here. The comparison is done in quantitative terms. This comparison is just to get a perspective on how these banks stand against each other.

Basic Information

ParametersHDFC BankKotak Bank
Market Cap (Rs. Crore)5,65,8332,36,224
Stock P/E29.735.8
ROCE7.32%7.93%
ROE17.87%13.87%
Total Capital Employed (Rs. Crore)1,17,63725,779
Total Assets (Rs. Crore)10,63,9883,37,720
Average ROCE – 3Years7.678.43
Interest Coverage Ratio1.641.7
D/E Ratio8.584.95
D/B Ratio5.324.68
Dividend Yield0.60.06
Promoter Holding21.43%30.02%
PEG Ratio1.411.55
Interest Coverage1.641.7
PAT Growth 5 Years21.05%23.05%
Sales Growth 5 Years18.01%18.32%
Gross NPA1.30%2.22%
Net NPA0.40%0.98%
  • In terms of PE, Kotak bank seems to be little over-priced in comparison with HDFC bank.
  • ROCE of both the banks is almost same.
  • ROE of HDFC bank looks better than the ROE of Kotak Bank.
  • Total Capital Employed of HDFC bank is almost 4 times that of Kotak bank.
  • Total Assets are the loans given in the market.
  • If the Interest Coverage ratio of a company falls below 2.5 then it can be an alarming sign. But this can be said in the case of banks, because their itself is of borrowing and lending. In case of banks, having interest coverage ratio above 1 is healthy. The banks have almost similar values, but Kotak has a little advantage.
  • Banks will always higher D/E ratio values as their business is of lending itself.
  • In terms of P/B ratio, HDFC bank looks a little over-priced.
  • Both the banks have dividend yield lower than the industry average. Lower the dividend yield the better it is for a bank. This means that promoter wants to still re-invest the money rather than taking a payout as a dividend.
  • The major promoter holder in HDFC bank is HDFC Ltd and the promoters of Kotak Bank are Mr. Uday Kotak family. RBI has instructed the promoters of Kotak Bank to reduce their holding in the bank up to 20% before 31st December 2018.
  • The PAT growth of Kotak bank is more.
  • Sales growth of the banks are almost same.
  • Gross NPA and Net NPA are two of the most important parameters here. HDFC bank scores very well here as their Gross NPA is very low in regards of their loans given in the market. In Net NPA too, HDFC bank has upper hand over Kotak bank.

Last 12 Quarter Results

HDFC vs Kotak Bank Quarterly Performance

These are the Quarter-on-Quarter results of the last 3 years.

  • Sales of HDFC bank has been increasing every quarter. Which is a very good sign.
  • Kotak bank too is growing on the same line. Only one quarter it has shown negative growth. But overall Kotak bank is also growing nicely.
  • In Net profit, there are only 3 quarters where HDFC bank has shown a little negative growth in quarter-on-quarter.
  • And in Kotak bank, there are only 2 negative growth quarters.
  • On these parameters, both the banks are growing only similarly.

Yearly Performance

HDFC vs Kotak Bank Yearly Performance

This is the yearly performance of the banks for the last 10 years.

  • Sales growth of HDFC bank in 10 years is 23.01%. And that of Kotak bank is 21.29%.
  • Net profit growth 10-Year CAGR of HDFC bank is 27.10%. And that of Kotak bank is 20.13%.

We have also shown sales & net profit growth on the base of 3-years rolling returns.

  • Here, one can see that in the last 3-year rolling returns of the last 3 years, the sales growth of Kotak bank is being beating those of HDFC bank.
  • And in profitability too, the 3-year rolling returns of last 2 years, the growth momentum can be seen shifting to the side of Kotak bank.

Share Price Movement

Comparison Chart HDFC vs Kotak shares

Source – Moneycontrol.com

  • The price movements of the stocks of both the companies is almost same.
  • Both the banks given around 700% returns in the last 10 years.
  • The returns of HDFC bank are a little higher as their dividend yield too has been a little higher as compared to Kotak bank.

Note: –

  • We are in no way telling anyone to go and invest in stocks immediately.
  • We are also not suggesting that these two are the best banks and to buy the stocks of these banks. Neither are we suggesting which one is better to buy.

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