HDB Financial Services Ltd overview & Analysis (HDFC Bank Subsidiary)

Detailed Stock Analysis of HDB Financial Services Ltd

Introduction

In this article, we are going to do a detailed stock analysis of HDB Financial Services Ltd, which is a non-deposit taking NBFC. It is a subsidiary company of HDFC Bank.

Detailed Stock Analysis of HDB Financial Services Ltd

Company Oerview

• HDB Financial Services Ltd (HDBFSL) is a leading Non-Banking Financial Company (NBFC) that caters to the growing needs of an Aspirational India, serving both Individual & Business Clients.
• Incorporated in 2007, the company has a well-established business with strong capitalization. Thus, HDBFSL is a non-deposit taking non-bank finance company (‘NBFC’) offering wide range of loans and asset finance products to individuals, emerging businesses and micro enterprises.
• It is a subsidiary company of HDFC Bank. As on June 30, 2019, HDFC Bank held 95.5% stake in HDBFSL.
• HDBFSL is accredited with CARE AAA & CRISIL AAA ratings for its long-term debt & Bank facilities and an A1+ rating for its short-term debt & commercial papers, making it a strong and reliable financial institution.

Key Business Segments

• HDB Financial Services’ line of business include –
  1. Lending
  2. BPO Services
• Lending: The company offers a wide range of secured and unsecured loans to its customers. The financial service also provides a one-stop-shop for all requirements such loans, investments and protection. The company has quickly grown to have more than 1000 Branches spread across 22 States & 3 Union Territories.
• BPO Services:  The BPO services division delivers back office services such as forms processing, documents verification, finance and accounting services and correspondence management. It  also deliver front office services such as  Contact center management, Outbound marketing and collection services.

Competitors : Muthoot Finance Ltd., Bajaj Finance, Bajaj Finserv, Aditya Birla Finance

HDBFSL’s Loan Mix : Break-up of Loans

HDBFSL Financial Performance

1. Revenue from operations majorly include:
   • Interest Income
   • Sale of Services
   • Other Financial Charges
2. AUM : Asset Under Management is the total market value of the investments that an entity manages on behalf of clients. Greater AUM shows greater trust placed by the customers in the Financial Service provider.
3. PAT : Profit After Tax is the earnings of a business after all income taxes have been deducted. It is an important measure in evaluation of a company.
4. Borrowings in terms of a financial service provider indicates the amount raised by the company from the market via corporate bonds, commercial papers, commercial papers or from RBI.

HDBFSL Q1 FY2019-20 Results Update

• Balance sheet Size & Gross Loan Book : As on June 30, 2019, HDBFSL’s balance sheet size was at Rs.58,833 Cr. The gross loan book grew by 22.7% Y-o-Y to Rs.56,287 Cr as on June 30, 2019 as against Rs.45,889 Cr as of June 30, 2018.
• Net Interest Income (NII) : For the quarter Q1 FY2019-20, HDBFSL’s Net Interest Income grew by 12.9% Q-o-Q to Rs.962.7 Cr from Rs.852.4 Cr in the previous quarter Q4 FY2018-19.
• Net Profit : PAT (Profit after tax) for Q1 FY2019-20 was Rs.221.9 Cr. compared to Rs.228 Cr in the last quarter Q4 FY2018-19, decreased by 2.7% Q-o-Q.
• Capital Adequacy Ratio(CAR) : Total CAR was at 18.1% with Tier-I CAR at 12.5%.
• Asset Quality : Gross impaired loans were at 2.3% of gross loans and net impaired loans were at 1.7% of net loans as on June 30, 2019.
• Branch Network : As on June 30, 2019, HDBFSL had 1,381 branches across 996 cities / towns.