Mission Funda Analysis

• Banking Sector.

• HDFC Bank.

• Expendables:-

– Manoj Kajla

– Praveen Yadav

– Col Ajay K Raina

Macro E Outlook

• To Mr A :-

Uncertainities+Volatility+PolicyParalysis.

• To Mr B:-

Survivor+FundamentallyStrong+Recoil.

• EO/PMO 2013-14:-

– GDP and FOREX Res headed South.

– Great Monsoons and improving CAD & Fiscal D.

– Rupee Northwards.

Macro E & Banking

• Liquidity tightening:-

– CRR/99% to 95%.

– Repo-MSF gap/300 to 150 pts.

• News of NPAs and Provisions.

• Industry under stress but in a consolidated,

competitive and risk-management mode.

• Banking Reforms still on.

Porters’ 5 Forces

• Barriers high but entrepreneurial threats and

Insurance companies venturing into mortgage.

• Suppliers affected by Inflation; steal HR.

• Buyers, esp corporates, are KINGS!

• Substitutes – Black Money, NBFCs, 0% Fin.

• Competition – Not all inclusive and yet all

available covered; ‘pay’ to lure.

Indian Banking Industry...

• Planning Commission’s 12th Plan + Vision 2020:

– Qualitative rather than quantitative expansions.

– 13.4% ahead vis-à-vis 16.7% earlier (05 yrs).

– 80% banking through PSBs.

• The Present Scene.

– PSBs focusing on reducing frills and NPAs.

– Pvt Banks consolidating.

– Pvt ones are leaders in technology.

– PSBs had an edge in penetration but competition catching up.

• Raghuraj’s Committee – more small, localised ones.

…Indian Banking Industry

• New RBI Governor

– Industry optimistic.

– The pressure would continue for a while.

• Big SBI v/s more efficient HDFC and AXIS Bank.

• The future that envisages growth of the nation, cannot ignore a parallel growth of banking sector………….. that being something inevitable, future looks bright for the industry despite present hiccups and glitches.

HDFC Bank

• Compounded annual growth of 29.5% - 10 yrs.

• Net interest margin = 4.5% v/s 3.77% of SBI (Means a lot when ₹ 35,861 Crore are involved)

• NPAs of 0.18% v/s 5.6% of PSBs.

• Promoters (22.83%), FIIs (34.07%) and total

Institutional (42.6%)….. Indicate something!

• No dip in profits (YoY) till date.

KPIs as v/s SBI (Mkt Cap of 151,378 : 110,242 ; Market Share of 5% v/s 18%)

• NPM R (PAT/Total Income) -16% v/s 3.77%.

• Cost/Income R – 48% v/s 45%.

• Investments: Provisions – 3 times v/s 3 times.

• ROE – 18% v/s 12%.

• PE R – 22 v/s 8 (Industry – 9.31).

• CAR – 16.8% v/s 12.9% vis-à-vis 9% Basel.

• NPA – 0.18% v/s 5.6%

• Nifty Weightage – 32.5 v/s 11.6

Conclusion….

• Macro E.

– Strong fundamentals;

– Growth path;

– Banks have a role to play…. K Factor.

• Banking Industry.

– Tough times do not last long; tough guys do.

– Stressful times and YET HDFC has out-performed.

….Conclusion • HDFC Bank.

– Lean, mean and smart : 5% share; Top in cap.

– Trading at 5x BV.

– PE is beyond reach.

– At 611, it is well placed between 52 Weeks high of

727 and low of 505.

– Shall BUY!

Thank You!!