Detailed Analysis of HDFC Bank Ltd

Introduction

In this article, we will do a detailed stock analysis of HDFC Bank Ltd. Lets analyse the stock with respect to business segments, key performance ratios, shareholding pattern etc.

HDFC Bank Stock Analysis

Company Overview

  • The HDFC Bank was incorporated on August 1994 by the name of ‘HDFC Bank Limited’, with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The Housing Development Finance Corporation (HDFC) was amongst the first to receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI’s liberalization of the Indian Banking Industry in 1994.
  • The promoter of the company HDFC was incepted in 1977 is India’s premier housing finance company and enjoys an impeccable track record in India as well as in international markets.
  • HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
Milestones
  • 1995 : HDFC bank received banking license
  • 1997 : HDFC bank crosses 1000 Cr and pays its maiden dividend of 8% on equity shares
  • 2000 : HDFC bank became the first bank to launch mobile banking
  • 2001 : becomes first private bank to be authorized to collect income tax
  • 2003 : credit card launched in over 100 cities, touching 1 million users
  • 2011 : HDFC bank became the market leader in auto and personal loans, credit cards
  • 2015 : HDFC mobile banking has largest number of mobile transactions, digital transactions accounting up to 55% of all transaction

Key Business Segments

HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments:

  1. Wholesale Banking Services – The Bank’s target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses.
  2. Retail Banking Services – The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements.
  3. Treasury – Within this business, the bank has three main product areas – Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio

Key Highlights of HDFC Bank Ltd

HDFC Bank Ltd Stock Analysis
HDFC Bank Ltd Stock Analysis
  • Historical P/E ratio for 3 years and 5 years of the bank stands at 26 and 24.8 respectively which shows that the stock is currently trading at a premium valuation.
  • ROCE at 7.69% is just above Industry average, while ROE at 16.96% is significantly above the Banking Industry average.
  • The reason behind HDFC bank trading at a premium valuation could be attributed to the talks of HDB Financial Services getting listed on the market.
Subsidiaries of HDFC Bank
  1. HDFC Securities Ltd (HSL)
    • HDFC securities Limited is a financial services intermediary. In the beginning it was a joint venture between HDFC Bank Limited, HDFC Limited and Indocean eSecurities Holdings Limited. It is a leading Retail Broking Firm in India.
    • HDFC Bank held 93.7% stake in HSL.
    • Competitors of HSL : Kotak Securities, Axis Direct, Zerodha, Motilal Oswal, IIFL
  2. HDB Financial Services Ltd (HDBFSL)
    • HDB Financial Services (HDBFSL) is a leading Non-Banking Financial Company (NBFC) that caters to the growing needs of an Aspirational India, serving both Individual & Business Clients. It is a non-deposit taking NBFC, which is mainly include in Lending and BPO services.
    • HDFC Bank held 95.5% stake in HDBFSL
    • Competitors of HDBFSL : Muthoot Finance Ltd., Bajaj Finance, Bajaj Finserv, Aditya Birla Finance

Shareholding Pattern of HDFC Bank

Shareholding Pattern of HDFC Bank (As on 30th June, 2019)
Shareholding Pattern of HDFC Bank (As on 30th June, 2019)
  • Promoters are the people behind the business/company. This is a very important factor. From the promoters we also come to about the Corporate Governance. The integrity of the promoters also impacts the image of the company. The promoters have a total holding of 26.25 % in the bank.
    1. Housing Development Finance Corporation Limited (Indirect Foreign Holding) = 19.48%
    2. HDFC Investments Limited (Indirect Foreign Holding) = 6.76%
  • Housing Development Finance Corporation Limited
    • Housing Development Finance Corporation Limited (HDFC Ltd.) was established in 1977 with the primary objective of meeting a social need of encouraging home ownership by providing long-term finance to households.
    • Over the last three decades, HDFC has turned the concept of housing finance for the growing middle class in India into a world-class enterprise with excellent reputation for professionalism, integrity and impeccable service.

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