Research Insight -3

General Overview of HDFC Bank

*Important points are highlighted with Grey Colour for better Comprehension of the Report.

Introduction: HDFC Bank Ltd. is an Indian banking and money related

administration organization headquartered in Mumbai, Maharashtra. It has
a base of 111,208 perpetual workers starting on 30 September 2019. HDFC
Bank is India’s biggest private segment loan specialist by resources. It is the
biggest bank in India by showcase capitalization as of February 2016.

History: A subsidiary of the Housing Development Finance Corporation,

HDFC Bank was incorporated in 1994, with its registered office in Mumbai,
Maharashtra, India. Its first corporate office and a full-service branch at
Sandoz House, Worli were inaugurated by the then Union Finance Minister,
Manmohan Singh. As of 30 June 2019, the Bank's distribution network was
at 5500 branches across 2,764 cities. The bank also installed 430,000 POS
terminals and issued 23570,000 debit cards and 12 million credit cards in
the FY 2017.

Products and services: HDFC Bank provides a number of products and

services including wholesale banking, retail banking, treasury, auto loans,
two-wheeler loans, personal loans, loans against property, consumer
durable loan, lifestyle loan and credit cards. Along with these various digital
products are Payzapp and SmartBUY.

Mergers: HDFC Bank merged with Times Bank in February 2000. This was
the first merger of two private banks in the New Generation private sector
banks category. Times Bank was established by Bennett, Coleman and Co.
Ltd., commonly known as The Times Group, India's largest media
conglomerate. In 2008, Centurion Bank was acquired by HDFC Bank. HDFC
Bank Board approved the acquisition of CBoP for ₹95.1  billion in one of the
largest mergers in the financial sector in India.
 Management of HDFC Bank

HDFC Bank's Board of Directors comprises eminent individuals with a

wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC Ltd. are also on
the Board.
Various businesses and functions in the Bank are headed by senior
executives with work experience in India and abroad. They report to the
Managing Director. The Bank is focussed on recruiting and retaining the
best talent in the industry as it believes that its people are a competitive
strength.
In March 2020, HDFC (parent company of HDFC BANK) made an investment
of ₹1,000 crores in Yes bank. As per the scheme of reconstruction of Yes
Bank, 75% of the total investment by the corporation would be locked in for
three years. On 14 March, Yes Bank allotted 100 crore shares of the face
value of ₹2 each for consideration of ₹10 per share (including ₹8 premium)
to the Corporation aggregating to 7.97 percent of the post issue equity
share capital of Yes bank.
 Shareholding pattern of HDFC Bank
The equity shares of HDFC Bank are listed on the Bombay Stock
Exchange and the National Stock Exchange of India. Its American Depository
Shares are listed on NYSE and the global depository receipt are listed on
the Luxembourg Stock Exchange where two GDRs represent one equity
share of HDFC Bank.

Shareholders (as of 31 December 2015) Shareholding

Promoter group (HDFC) 26.14%

Foreign institutional investors (FII) 20.4%

Individual shareholders 8.5%

Bodies corporate 7.5%

Insurance companies 5.38%

Unit Trust of India 8.65%

NRI/OCB/others 0.29%

Financial institutions/banks 2.75%

ADS/GDRs 18.78%
 SWOT analysis of HDFC Bank

STRENGTH
WEAKNESS

Rising Net Cash Flow and Cash MFs decreased their

STRENGTH

WEAKNESS

from Operating activity. shareholding last quarter.

Growth in Quarterly Net Profit
with increasing Profit Margin
Decline in Net Profit with
(YoY). falling Profit Margin
Increasing Revenue every (QoQ).
Quarter for the past 4 Quarters. Companies with Increasing
Annual Net Profits improving Debt.
for last 2 years. Declining profits every
Company with Zero Promoter quarter for the past 2
Pledge.
quarters.
FII / FPI or Institutions
increasing their shareholding Promoter decreasing their
Strong Momentum: Price above shareholding.
short, medium and long term Low Piotroski Score :
moving averages. Companies with weak
financials.
 OPPORTUNITY
THREATS
Companies with current
THREATS
OPPORTUNITY
TTM PE Ratio less than 3
Year, 5 Year and 10 Year
PE.
Brokers upgraded
recommendation or target
price in the past three
months,
Positive Breakout First
Resistance ( LTP > R1).
Decrease in Provision in
recent results.
RSI indicating price
strength.
Increase in NPA in Recent
Results.
The non-banking
budgetary organizations
and new age banks are
expanding in India.
The HDFC can’t extend its
piece of the overall
industry as ICICI forces
significant danger.
The administration banks
are attempting to
modernize to contend
with private banks.
RBI has opened up to 74%
for outside banks to put
resources into the Indian
market.
 Competitive Analysis of HDFC Bank

 HDFC's top 10 competitors are: -

SBI ICICI Bank BOB PNB

YES BANK BOI Canara Bank Kotak

Axis Bank IDBI

 Together they have raised over 64.1B between their estimated 3.0M
employees.
 HDFC has 115,822 employees and is ranked 9th among its top 10
competitors.
 The top 10 competitors average 103,407.

 ICICI Bank is one of HDFC's top rivals.

 ICICI Bank was founded in Mumbai, Maharashtra} in 1955.
 ICICI Bank operates in the Banks industry.
 Compared to HDFC, ICICI Bank generates $3.4B more revenue.

 SBI is HDFC's #1 competitor.

 SBI's headquarters is in Mumbai, Maharashtra, and was founded in 1806.
 Like HDFC, SBI also works within the Banks sector.
 SBI generates 341% of HDFC's revenue.

 BOB is one of HDFC's top competitors.

 BOB is a Public company that was founded in 1908 in Baroda, Gujarat.
 BOB is in the Banks industry.
 Compared to HDFC, BOB has 31,539 fewer employees.
 Conclusion and way forward for HDFC Bank
 As of 1QFY21, Overall loan growth was 21% YoY and 1% QoQ driven by
wholesale book which grew by 6% sequentially.
 The robust growth has come from many public sector corporations, MNCs
and private corporations having higher liquidity.
 The bank has also supported liquidity needs to the NBFCs through PSL and
ECLS. The bank carries a strong underwriting notch as nearly 86%
(externally rated) of the wholesale portfolio is AA & AAA.
 The management has announced that the risk assessment is also done
internally by scale of HDB - 1 to 10, which has served the bank well over the
years and time tested.
 As of 1QFY21, the weighted average asset scale of 1 to 10 stood at 4.5%
against 4.43, 4.56, 4.6% in 4QFY20, 3QFY20 and 2QFY20 respectively.
 The bank has also evaluated the corporate book on the basis of utilization
where 45% towards Capital expenditure, 30% towards working capital, 13%
for supporting market intermediaries and 6% for PSL.
 On unsecured credit front; Personal loans are entirely towards salaried
employees of good corporates leading to lower volatility.
 The bulk of the moratorium was out of caution and not out of stress. The
management alluded that hardly 5% of PL books are where the salary cut is
5% or more.
 Considering the management commentary, we expect the stress to remain
minuscule where the current GNPA/NNPA/PCR stood at 1.36/0.33/76%.
 Excluding Agriculture book, GNPA increased 10bps to 1.2%.