hdfc motilal 300813

8/12/2019 HDFC Motilal 300813

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Alpesh Mehta([email protected]); +91 22 3982 5415

Sunesh Khanna ([email protected]); +91 22 3982 5521

29 August 2013

Update | Sector: Financials

HDFCCMP: INR654 TP: INR889 Buy

Superior execution and consistent performanceResilient on macros; return ratios to remain superior

Housing Development Finance Corp (HDFC) has corrected by 23% andunderperformed the Nifty by 11% since the Reserve Bank of Indias (RBI)

tightening of system-wide liquidity on July 15, 2013. This was on the back of rising

investors concerns over higher cost of funds (impacting spreads) and increasing

stress in the real estate segment.

In the current uncertain macro-economic conditions, HDFC is likely to be the mostresilient in asset quality (cash flow-based lending, strong collateral in place etc)

and growth (structural factors to aid). Subsidiaries/associates are self-funded and thus further dilution is not needed to

take care of their capital requirements; strong internal accrual (core lending RoE

of 26%+) will take care of HDFCs loan growth requirements.

Based on assets and liability side flexibility, spreads shall remain in the range of2.15-2.35%.

Led by stable spreads, single digit cost to income ratio and superior asset quality,return ratios are expected to remain above industry average, with core RoA of

~2.5% and core lending RoE of ~26%.

In the best lending asset class; growth, asset quality to remain healthy

On the back of latent housing demand and structural growth drivers, we believe

18-20% growth will not be a difficult target for HDFC. Though, select urban and

metro markets are witnessing a slowdown in disbursements, company has

ramped up distribution in Tier II and III centers where demand remains buoyant

and is driving growth. No major job losses, lower LTV (65%) and installment to

income ratio (~40%), financing of immovable real asset and the cardinal

principal of lending against cash flows shall keep retail asset quality healthy, in

our view. On the corporate side, prudent risk management, strong security

cover and higher dependence of developers on HDFC shall ensure healthy asset

quality.

Diversified balance sheet mix to ensure stability in spreads

Flexibility in asset (AUM mix individual-corporate at 69:31) and liability side

(deposits 33%, bank loans 8% and rest through bonds, CPs etc) helps HDFC to

maintain spreads at ~2.15-2.35% across cycles. In our view, in case of a

prolonged tightness in the liquidity situation, company will prefer to raise the

lending rates (already up 25bp in current liquidity tightness) and maintain

spreads, than chase growth.

Guzzling subsidiaries turn enablers of capital

Most of HDFCs subsidiaries have grown sizably and become self-sufficient to

fund their growth. Further capital infusion in the life insurance business is not

needed as it is profit making now. With the healthy Tier I ratio of 10.5%+, RoE of

BSE Sensex S&P CNX

17,996 5,285

Stock Info

Bloomberg HDFC IN

Equity Shares (m) 1,554.7

52-Week Range (INR) 931/632

1, 6, 12 Rel. Per (%) -11/-9/-12

M.Cap. (INR b) 1,011.3

M.Cap. (USD b) 14.9

Financial Snapshot (INR b)

Y/E March 2013 2014E 2015E

NII 61.8 73.7 88.6

PAT 48.5 56.3 66.4

Adj. EPS * 26.2 30.8 36.7

BV/Share* 161.7 180.9 201.3

ABV /Sh* 108.5 127.8 148.2

RoAA (%) 2.7 2.6 2.6

Core RoE 23.8 25.6 26.1

AP/E (x) 16.7 13.0 9.7

P/BV (x) 4.0 3.6 3.2

AP/ABV (x) 4.0 3.1 2.4

* Adjusted

Shareholding pattern %

Jun-13 Mar-13 Jun-12

Promoter 0.0 0.0 0.0

Dom. Inst 12.7 12.9 15.1

Foreign 74.1 74.2 71.3

Others 13.2 12.9 13.6

Stock Performance (1-year)

Investors are advised to referthrough disclosures made at the

end of the Research Report.

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HDFC

29 August 2013 2

23-24% and growth rate of 20-25%, HDFC Bank is unlikely to raise capital over

the next 12-15 months. In the medium term, increase in foreign ownership limit

will provide capital (listing/stake dilution) to HDFC Ltd, which in turn can be

used to fund HDFC Bank if needed.

Reiterate Buy with SOTP-based target price of INR889; upside 36%

Stable spreads across interest rate cycles, impeccable asset quality track record

and single digit cost to income ratio shall ensure superior core lending business

RoA of 2.4-2.5% and RoE of 26%+. We expect HDFC to report core EPS of

INR31/37 in FY14E/15E (FY13-15E EPS CAGR of ~18% on a base of 15% over

FY08-13). The Adjusted Book Value (adj. for investments in subsidiaries) would

be INR128/148 in FY14E/15E. The stock trades at a core PE of 13/9.8x

FY14E/15E (24% lower compared with its historical average of 17-18x). Buy.Buy for upside of 36%

SOTP FY15E Based (INR)Value

(INR b)

Value

(USD b)

Value/

Sh. (INR)% of total Rationale

Core business 917 13.5 593 66.74x FY15 Adjusted BV (for investments in subs and

HDFC Bank, Implied P/E of 16x Core EPS)

Key Ventures

HDFC Bank 410 6.0 265 29.8 Valued at INR755/share 3.5x FY15E BV

HDFC Standard Life (72.5% stake) 107 1.6 69 7.8 Appraisal Value; Economic Stake - 72.5%

HDFC AMC (60% stake) 30 0.4 19 2.2 4% FY15E AUM, 15x FY15E PAT

Property Funds 7 0.1 4 0.5 13.3% of total AUM USD1.1b

HDFC General Insurance (74% stake) 7 0.1 4 0.5 Last stake sale value + 20%

Gruh Finance 13 0.2 8 0.9 Valued at 3x FY15E BV

Total Value of Ventures 573 8.4 370 41.7

Less: 20% holding discount 115 1.7 74 8.3

Value of Key Ventures 458 6.7 296 33.3

Target Value Post 20% Holding Company

Discount1,375 20.2 889 100.0

CMP 1,011 14.9 654

Upside - % 36.0 36.0 36.0

Target Price w/o 20% Holding Company

Discount1,490 21.9 963

CMP 1,011 14.9 654

Upside - % 47 47 47

Source: Company, MOSL

Consistent performance in growth, profitability and asset quality

Source:Company, MOSL

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HDFC

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Consistency, a hallmark; in best lending asset classGrowth and asset quality to remain healthy

On the back of latent housing demand and structural growth drivers, we believe18-20% growth will not be a difficult target for HDFC.

No major job losses, lower LTV (65%) and installment to income ratio (40%), financingof immovable real asset and the cardinal principal of lending against cash flows shall

keep retail asset quality healthy, in our view.

On the corporate side, prudent risk management, strong security cover and higherdependence of developers on HDFC shall ensure healthy asset quality.

Structural factors in place; long term opportunity remains sizable

HDFC remains well positioned in a business segment where secular growth drivers

are in place and could support loan CAGR of ~20% in the near-to-medium term.

Factors such as expected healthy economic growth, higher disposable incomes,

improved affordability and latent demand for housing remain the major volume

drivers for industry players. Further, the increase property prices will also add to

overall growth of players; HDFC being a market leader in the housing finance

industry has been able to reap these benefits. With the addition of newer sources of

distribution over the last decade, we believe it is strategically well placed to

capitalize on the longer term opportunity.

Retail AUM growth has been consistent across rate cycles

Source: MOSL, Company

HDFCs retail AUM growth ~2x of nominal GDP growth


HDFC: Retail growth outpaces banks home loan growth


Increased affordability aids mortgage growth

0

6

12

18

24

0.0

1.3

2.5

3.8

5.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Proper ty Value (INR m; LHS)

Annual Income (INR m; LHS)

Affordability (x)


Structural factors like

mortgage under-

penetration, urbanization,

latent housing demand will

keep the near to mediumterm growth rates at 18-

20%

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HDFC

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Tailwinds to keep near term growth too healthy despite macro concerns

While near term macro uncertainty has raised questions related to growth, in our

view, flexibility on asset side (to shuffle between wholesale and retail), increased

presence (helped by strong distribution network of group companies) in Tier II and

III cities and disbursements of already sanctioned loans will aid near term growth.

We have factored loans CAGR of ~19% over FY13-15E.

HDFC: Prudently keeps AUM mix constant


Incremental AUM mix: Retail share increased in FY13


Share of associate companies increased in overall sourcing of loans

36 40 4446 46 47 46

2427 29 30 30 28 28

35 3022 18 16 14 11

5 3 5 6 8 11 15

FY07 FY08 FY09 FY10 FY11 FY12 FY13

HDFC Sales Pvt. Ltd. HDFC Bank Direct Walk-ins DSAs


Best collateralized product for lending; asset quality not much of a concern

Conservative lending policies and superior credit appraisal skills have led to superior

asset quality for HDFC.As in June 2013, gross NPLs (90 days overdue) were 0.77% ofloans and GNPLs (180 days overdue) at 0.38%, which have been adequately

provided, resulting in zero NNPAs. 1QFY14 was the 34th

consecutive quarter wherein

GNPA (%) declined on a YoY basis. HDFC, through its conservative provisioning

policy, has always maintained a buffer for contingencies. As in June 2013,

outstanding provisions for contingencies stood at INR18b, against the stipulated

requirement by the National Housing Bank (NHB) of INR13.3b (of which INR9.1b is

for standard assets).

1QFY14 was the 34th

consecutive quarterwherein GNPA (%) declined

on a YoY basis.

Direct walk-in which

contributed 35.8% of

incremental loan sourcing

in FY07, reduced to 11%

in FY13

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HDFC

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Stable spreads across various rate cyclesDiversified balance sheet mix to ensure stability

Flexibility in asset (AUM mix: individual-corporate at 69:31) and liability side (deposits33%, bank loans 8% and rest through bonds, CPs etc) helps HDFC to maintain spreadsat ~2.15-2.35% across cycles.

In our view, in case of prolonged tightness in liquidity situation, company will prefer toraise lending rates and maintain spreads, than chase growth.

Unmatched performance in spreads

HDFC has demonstrated its superior asset-liability management skills by maintaining

spreads in a narrow band of 2.15-2.35% across various cycles. Despite large part of

borrowings being in the form of wholesale or bank term loans, company has been

able to maintain spreads within a narrow range, which is commendable. Diversified

funding mix, aggressive utilization of securitization as a source of funding (ifmanagement decides) and well-matched ALM shall help HDFC to keep spreads

stable at ~2.2% levels.

Stable spreads across interest rate cycles

1.0

1.5

2.0

2.5

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Jun06

Jan07

Jun08

Nov08

Mar09

Apr10

Sept10

Mar11

Jul11

Oct11

Mar13

Re po Rate (%) (lhs) Spre ads(%) (rhs)


Stable spreads even in extremely tight liquidity scenarios

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

-1500

-1000

-500

0

500

1000

1500

Q32005

Q12006

Q32006

Q12007

Q32007

Q12008

Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

Q12012

Q32012

Q12013

Q32013

Q12014

Avg LAF(INR b) Spreads (%)


Higher short term rates lead to rise in fixed rate liabilities

7780

78

85

75

71

81 8279

87

84 84

FY08 FY09 FY10 FY11 FY12 FY13

Floating rate assets (%) Floating Rate Liabilities (%)


Well-matched ALM (Liabilities-assets) across buckets (INR b)

-3

25

-15-7

6

-22-29

-15

4

36 37 3432

-10

11

-29-43

-12

FY08

FY09

FY10

FY11

FY12

FY13

Upto 1 year 1-5years >5years


Recent tightness unlikely to result in spreads compressionBased on evolving liquidity (pressure on cost of funds) and growth (loan pricing

pressure from banks) dynamics, we expect the share of term loans to increase (in

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HDFC

29 August 2013 7

the near term) and retail deposits to remain a key source of funding. In FY13, of the

incremental AUM mix, 80% came from retail housing v/s its share of 67% at end-

FY12. To protect overall spreads, there remains a possibility of marginal increase in

the share of high-spread corporate business. We draw comfort from efficient ALM

management of the company, which has been tested time and again.

Bulk of incremental funding from bonds & deposits in FY13


Individual segment now forms 80% of incremental lending


Increasing borrowings avenues; ECB & higher limit from insurance companies

As on 1QFY14 funding mix comprised of 59% bonds, FCCBs and CPs, 8% domestic

term loans and 33% deposits, which reflect diversity and granularity in its funding

profile. Historically, HDFC utilized various sources of funding based on liquidity, rate

and demand for instruments. In a tight liquidity and rising interest rate

environment, company preferred to borrow via retail deposits, and in case of easy

liquidity and falling rate scenario, it preferred the wholesale market (bank termloans and money markets). For example in FY13, of the incremental liabilities, 80%

came from retail deposits, while bonds replaced bank term loans as banks were

constrained by base rates.

HDFC replaced high cost bank borrowings with low cost bonds, retail deposits in FY13


While the current environment is not remunerative to borrow funds via ECB

(recently allowed for HFCs) and access more money via FII participation in debt

markets, it provides a strong long term platform for HDFC. A relaxation for

insurance/domestic MF limit for HFCs borrowings can also be a big boost in terms

of diversification of liability in the long term.

Strong asset liability

management keeps

spreads stable

Diversified borrowingprofile helps manage

cost of funds

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HDFC

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Subsidiaries: Guzzlers turn enablers of capitalInternal accrual to take care of lending business growth requirement

Most of HDFCs subsidiaries have grown sizably and become self-sufficient in terms offunding their own growth. There is no requirement for further capital infusion in thelife insurance business as it is now profit making.

With improving profitability, subsidiaries have started returning capital and higherdividend. We expect the share to rise as subsidiaries will continue to grow faster than

standalone operations of HDFC.

Due to the healthy Tier I ratio of 10.5%+, RoE of 23-24% and growth rate 20-25%, HDFCBank is unlikely to raise capital over next 12-15 months. In the medium term, listing of

life insurance arm will present capital to HDFC, which in turn can be used to fund HDFC

Bank, if needed.

Equity dilution done only to fund subsidiaries; core RoEs to help fund own growth


Share of dividend from subsidiaries increasing in overall profits (%)


HDFC Bank: Best retail franchise in country; consistent improvement in RoE

HDFC Bank, known for its consistent performance across operating parameters, has

delivered steady returns over the years. In the past decade, banks loan book posted

a CAGR of 40%, while earnings (PAT) clocked a CAGR of 33%. During the same

period, it delivered superior return ratios, with average RoAs of ~1.5% and RoEs of

~18%.

1.19

1.19

1.19

1.19

1.19

1.20

1.22

2.44

2.47

2.49

2.50

2.53

2.84

2.84

2.87

2.93

2.95

3.10

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

54.7m warrants converted, issued for

capital infusion in HDFC Bank in FY09

1:1 Bonus Issue

QIP of 18m shares atINR1,730 per share for

capital infusion in HDFC

Bank

0.1 0.2 0.3 0.4 0.21.1 1.0

1.8

2.8

4.4

1.7 1.82.5 2.4

0.6

4.7

3.4

5.0

6.7

9.0

FY0

4

FY0

5

FY0

6

FY0

7

FY0

8

FY0

9

FY1

0

FY1

1

FY1

2

FY1

3

Dividend income (INRm) Share in overall profits (%)

Investment phase over as

most of the subsidiaries

have become self sufficient

and do not require

fresh capital

Subsidiaries have

improvement in profitability

and have started returning

capital and are paying

higher dividends

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HDFC

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Well-capitalized to grow for next 12-15 months

During the high growth period of past decade, the bank raised capital nearly every

two years to fund growth. However, over the past few years, we have noted a

structural shift in HDFC Banks profitability profile, which has been reflected in the

strong return ratios clocked by it. In FY13, the bank achieved RoAs of 1.8% and RoEs

of ~20%, against average RoAs and RoEs of ~1.5% and ~18% during FY05-12.

Importantly, the improvement in RoEs has been achieved despite high tier I ratio of

10.5%+ now. Historically, the bank achieved RoEs of close to 20% just before it

raised capital. Currently, the improvement in return ratios, given high capital

adequacy, would help grow its loan book at 20% CAGR without raising capital at

least over next 12-15 months. This augurs well for HDFC Ltd as it will not require

capital infusion for the bank in the near term and hence does not exert any capital

pressures on the former.

Structural shift seen in HDFC Banks profitability

1.4 1.4 1.4 1.41.5

1.61.7

1.8

2.0 2.0

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

F

Y14E

F

Y15E

RoA(%)


RoEs improve despite higher capital adequacy

17.7

19.5

17.716.9

16.116.7

18.7

20.3

22.123.1

8.6 8.6 10.3 10.6 13.3 12.2 11.6 11.1 10.8 10.3

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14E

FY15E

Tier 1 (%) RoE (%)


HDFC Life Insurance: A steady player, profitability improves

In the life insurance space, HDFC Life is the second largest private sector player and

among one of the most consistent in the industry. Despite various regulatory

headwinds impacting growth and profitability dynamics of all insurers, HDFC Life has

consistently outperformed peers. Due to consistent higher-than-industry growth,

HDFC Life has become the second largest private sector insurer with 6.7% (overall

market share) market share (as in March 2013), though a tad lower than market

leader ICICI Prudential Life which enjoys 7.2% market share.

Business turns profitable; may not require additional capital infusion

Unlike some peers in the past, HDFC Life has not sacrificed profitability for market

share. Among major life insurers, company enjoys the second highest persistency

ratio after Max New York Life. Also, HDFC Life maintained a tight control on costs,

which resulted in marked improvement in its profitability.

With improved profitability and moderation in growth, the life insurance subsidiary

recorded a maiden profit of INR2.7b in FY12, which improved to INR4.5b in FY13.

We believe, going forward, the life insurance business profitability should improve

further as the business gains larger size and company continues to make operations

HDFC Life has consistently

outperformed peers.

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HDFC

29 August 2013 10

leaner to achieve better profitability. While the insurance business should not need

further capital infusion, its listing could unlock value for existing shareholders.

Life insurance business turned profitable in FY12

-1.3 -1.3-2.4

-5.0-2.8

-1.0

2.7

4.5

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

HDFC Life insurance PAT(INR bn)


HDFC general insurance; self-sufficient, no more capital infusion required

In the general insurance space, HDFC Ergo has been a relatively smaller player with a

market share of 4-5%. The profitability of general insurance business had got

impacted adversely due to higher claims incurred by the company. In FY10, HDFC

Ergos combined ratio increased sharply to 135%, compared with 115% for ICICI

Lombard and 104% of Bajaj general insurance. However, since then, company had a

tight leash on claims and operating expenses, thus taking the combined ratio to

119% in FY11, 105% during FY12 and 92.6% in FY13, which improved profitability.

HDFC Ergo reported a PAT of INR1.54b v/s a loss of INR397m a year ago.

HDFC asset management: no capital infusion needed

HDFC MF is the largest asset management company in the country, with assets

under management of INR1,021b as in March 2013 and a market share of 12.4%. As

in March 2013, HDFC MF had equity AUMs of INR375b, constituting 37% of total

AUMs. HDFC MF generates healthy RoEs and does not require any more capital

infusion.

HDFC MF: Profitability remains healthy

0.460.68

1.18 1.29

2.082.42

2.69

3.19

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13

HDFC AMC PAT (INR bn)


HDFC Ergo turned profitable in FY13

-0.26

-0.94

-0.36 -0.40

1.55

FY09

FY10

FY11

FY12

FY13

HDFC Ergo PAT (INR bn))


Insurance businesses of

HDFC (both life & non-life)

have become profitable

and do not require

capital infusion

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HDFC

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Superior return ratios; attractive valuationsRetain as top pick with SOTP-based target price of INR889

Stable spreads across interest rate cycles, impeccable asset quality track record andsingle digit cost to income ratio shall ensure superior core lending business RoA of 2.4-2.5% and RoE of 26-27%.

Business growth will be driven by continued momentum in the individual home loansegment and traction in housing demand in Tier II/III cities. We model loans CAGR of

~19% during FY14E/15E.

At CMP of INR654, HDFC trades at an attractive valuation of 9.8x FY15E core lendingbusiness EPS. Our SOTP-based target price is arrived at from 4x P/core BV (16x lending

business EPS) to lending business and INR297/share for subsidiaries (including HDFC

Bank).

Superior execution and consistent performance

HDFCs execution, by withstanding competitive pressure without impacting core

parameters and profit growth, is commendable. Across different rate and growth

cycles, company has proved its superior execution skills by delivering consistent

performance (loan CAGR of 25% over FY00-13, core PBT (ex trading gains and

dividend income) CAGR of 30%, led by largely unaltered strategy and stability at the

top, compared to peers, and by translating business opportunity into stable and

profitable growth.

Historically, HDFC has grown its business at a healthy pace of 25% CAGR over FY00-

11, with spreads stable within a narrow band of 2.1-2.3% and superior asset quality

across business cycles. Return ratios remained strong, with core RoA of ~2.3%+ and

core lending RoEs of 25%+ over the years. We expect HDFCs core operations to

remain strong and model a loan CAGR of ~19% during FY13-15E. Spreads are likely

to remain stable at 2.2-2.3% over FY13-15E. Healthy business growth, stable

spreads, control over opex and robust asset quality should lead to healthy return

ratios, with RoAs of ~2.3%+ and core lending RoE of 26%+.

HDFC P/E Band


HDFC P/B Band


Consistence performance

across interest rate/ asset

quality cycles makesHDFC one of the most

resilient lender

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HDFC

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Buy for upside of 36%

SOTP FY15E Based (INR)Value

(INR b)

Value

(USD b)

Value/

Sh. (INR)% of total Rationale

Core business 917 13.5 593 66.74x FY15 Adjusted BV (for investments in subs and

HDFC Bank, Implied P/E of 16x Core EPS)

Key Ventures

HDFC Bank 410 6.0 265 29.8 Valued at INR755/share 3.5x FY15E BV

HDFC Standard Life (72.5% stake) 107 1.6 69 7.8 Appraisal Value; Economic Stake - 72.5%

HDFC AMC (60% stake) 30 0.4 19 2.2 4% FY15E AUM, 15x FY15E PAT

Property Funds 7 0.1 4 0.5 13.3% of total AUM USD1.1b

HDFC General Insurance (74% stake) 7 0.1 4 0.5 Last stake sale value + 20%

Gruh Finance 13 0.2 8 0.9 Valued at 3x FY15E BV

Total Value of Ventures 573 8.4 370 41.7

Less: 20% holding discount 115 1.7 74 8.3

Value of Key Ventures 458 6.7 296 33.3

Target Value Post 20% Holding Company

Discount1,375 20.2 889 100.0

CMP 1,011 14.9 654

Upside - % 36.0 36.0 36.0

Target Price w/o 20% Holding Company

Discount1,490 21.9 963

CMP 1,011 14.9 654

Upside - % 47 47 47


DuPont Analysis (%)

2008 2009 2010 2011 2012 2013 2014E 2015E

Net Interest Income 3.67 3.45 3.28 3.50 3.40 3.40 3.44 3.49

Non Interest Income 0.40 0.40 0.66 0.65 0.64 0.59 0.54 0.53

Fees and Other Charges 0.08 0.12 0.21 0.17 0.17 0.13 0.13 0.13Treasury and Dividend

Income0.29 0.25 0.43 0.46 0.45 0.44 0.38 0.38

Other Income 0.03 0.02 0.02 0.02 0.01 0.02 0.02 0.02

Net Income 4.07 3.85 3.94 4.16 4.04 4.00 3.98 4.02

Operating Expenses 0.38 0.34 0.30 0.30 0.29 0.30 0.29 0.29

Cost to Income Ratio (%) 9.30 8.82 7.53 7.17 7.29 7.43 7.39 7.21

Employee Expenses 0.16 0.15 0.13 0.14 0.13 0.14 0.14 0.14

Other Expenses 0.22 0.19 0.16 0.16 0.16 0.16 0.16 0.15

Operating Profit 3.69 3.51 3.64 3.86 3.75 3.70 3.69 3.73

Provisions/write offs 0.04 0.05 0.05 0.05 0.05 0.08 0.09 0.10

Extra ordinary Income 0.85 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PBT 4.50 3.46 3.59 3.80 3.69 3.62 3.60 3.63

Tax 1.25 1.01 1.00 1.04 1.01 0.95 0.97 1.02

Tax Rate 27.78 29.09 27.82 27.37 27.23 26.24 27.00 28.00

Reported PAT 3.25 2.45 2.59 2.76 2.69 2.67 2.63 2.62

Adjusted PAT 2.59 2.45 2.59 2.76 2.69 2.67 2.63 2.62

Leverage (x) 8.57 7.42 7.70 7.87 8.44 8.25 8.09 8.59

RoE 22.17 18.20 19.95 21.74 22.69 22.03 21.24 22.47

Core RoE 38.12 27.77 23.01 23.10 22.31 23.76 25.60 26.07

Source: MOSL

Stable margins

across cycles

Share of dividend

income rising

Strong control

over cost

Stable operating

profitability

Expect core lending

RoE of 25%+

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Financials and Valuation

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HDFC

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Financials and Valuation

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HDFC

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N O T E S

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