8 May 2021
4QFY21 Results Update | Sector: Financials
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
HDFC IN
1,721
4503.1 / 61.3
2895 / 1486
1/-1/-10
10881
CMP: INR 2,496
TP: INR3,275 (+31%)
Strong operating performance across parameters
HDFC
Buy
Financials & Valuations (INR b)
Y/E March
Core PPoP
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
ABV/Sh. (INR)
Core RoA (%)
Core RoE (%)
Payout (%)
Valuation
AP/E (x)
P/BV (x)
AP/ABV (x)
Div. Yield (%)
2021
146.5
106.9
54.5
10.8
609.3
475.9
1.9
12.7
40.0
24.1
4.1
2.8
0.9
2022E
167.4
126.6
63.1
15.8
653.6
520.2
1.9
12.7
44.1
18.1
3.8
2.2
1.1
2023E
191.8
146.1
72.7
15.3
704.7
571.3
1.9
13.3
44.1
12.8
3.5
1.6
1.3
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
0.0
0.0
DII
16.3
17.3
FII
72.8
72.0
Others
10.9
10.7
FII Includes depository receipts
Mar-20
0.0
18.0
70.9
11.1
HDFC’s core PBT grew 19% YoY to INR33.4b (estimate of INR34.2b) of). NII
(ex-assignment income) at INR40.3b was 4% above our estimate. On the
other hand, provisions at INR7.2b were much higher than our est. of
INR3.8b. Better-than-expected MTM gains on investment led to a 12% beat
on reported PAT (+9 QoQ /42% YoY).
For FY21, core PBT / core operating profit grew a healthy 15%/17% YoY to
INR126b/INR146b, despite an additional ESOP charge of INR3.4b.
Strong disbursement growth (on a low base) of 60% YoY, stable QoQ
spreads at 2.3%, GNPA at 1.98%, and a reduction of 74bp QoQ in stage 2
assets were the key positives for the quarter
We largely maintain our estimates. We expect HDFC to report core RoA/RoE
of 2%/13% over FY22–23E. Reiterate
Buy,
with SOTP-based TP of INR3,275
(FY23 SOTP-based).
Robust disbursement performance; loan mix largely stable
The recovery in disbursements was much stronger than expected at the
start of FY21. During the fiscal, HDFC reported 3% YoY growth in individual
disbursements, with 4Q/2H coming in at 60%/42% YoY. Overall individual
AUM grew 5% QoQ / 12% YoY to INR4.4t.
The share of individual loans was
up ~120bp QoQ to 77% (the highest ever).
Non-Individual segment AUM declined ~2% QoQ and grew just 4% YoY.
Growth in this segment was partially impacted by pre-payments (INR94b) in
LRD due to the listing of REITs, leading to a run-off of AUM. An uncertain
environment also led to higher risk aversion. Overall AUM grew +3% QoQ /
10% YoY to INR5.7t.
The company assigned loans worth INR75b during the quarter v/s INR55b
YoY. The corresponding assignment income stood at INR4.3b (v/s INR4.1b
QoQ and INR2.4b YoY).
GNPLs at 1.98% | stage 2 loans up YoY | restructuring at 80bp of AUM
The overall GNPL ratio increased 7bp YoY to 1.98%. However, the corporate
book witnessed a 42bp increase in the GNPL ratio to 4.77%.
Stage 2 loans decreased 74bp QoQ to 6.3% due to some downgrades and
resolutions in the accounts. On a YoY basis stage 2 is up 84bp due to 1)
select stage 1 accounts opting for ECLGS and 2) the classification of all
restructured accounts as stage 2 loans.
During the quarter, the company restructured loans worth INR44.8b (80bp
of AUM). ~73% of these loans are from the Non-Individual segment, of
which one account forms ~50bp of AUM.
The company continues to maintain elevated provisions.
The total buffer
stands at ~2.6% of loans – the highest in our HFC Coverage Universe.
In Mar’21, for the Individual Lending business, collection efficiency (CE)
stood at 98.0% on an overall basis (97.6% in Dec’20) – similar to pre-COVID
levels.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com)
| Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14 January 2020
1
 Motilal Oswal Financial Services
HDFC
Margins largely stable; lower liquidity on balance sheet
Overall spreads were sequentially stable at 2.3%; NIMs improved 10bp QoQ to
3.5%. The average daily balance in liquid funds was INR157b in 4Q v/s INR168b
QoQ.
While individual spreads were stable at 1.93% for FY21 v/s 9M, non-individual
spreads improved to 3.22% (v/s 3.14% for 9M).
Total borrowings increased ~2% QoQ to INR4.4t. The share of deposits in total
borrowings inched up 92bp QoQ to ~34%. Total deposits edged up ~5% QoQ to
INR1.5t.
Highlights from management commentary
INR9.36b ECLGS has been disbursed to date. Many of these loans are classified
as Stage 2.
There seem to be fewer bottlenecks amid the second wave. Disbursements in
Apr’21 were more than in 1QFY21.
Other highlights
The average size of individual loans disbursed for FY21 stood at INR2.95m
(INR2.70m in FY20). An uptick was seen in the average ticket size to
INR3.14m in 4Q, attributable to demand for higher end properties, especially
in metro cities.
In FY21, ~33%/16% of home loans approved in volume/value terms were to
customers from the Economically Weaker Sections (EWS) and Low Income
Groups (LIG). Average home loans to the EWS/LIG segment stood at
INR1.08m/INR1.86m
~0.23m customers have availed benefits under the Credit Linked Subsidy
Scheme (CLSS). Cumulative loans disbursed under CLSS stood at INR393b. The
subsidy amounted to INR52.1b.
The final dividend stood at INR23/share v/s INR21/share a year ago.
CAR remains healthy at 22.2%, with Tier I of 21.5%. RWA assets were flat YoY at
INR3.98t.
Valuation and view
4QFY21 was a strong quarter on all fronts. Disbursements have been picking up
MoM and have exceeded YoY levels over the past quarter. With declining cost of
funds and a reduction in excess liquidity on the balance sheet, margins should be
stable despite pressure on retail lending yield. CE trends are encouraging. With
provisions >GNPLs, we believe the company has made more-than-adequate
provisions for any potential asset quality slippages in the ensuing quarters. Our core
PBT/PAT estimate for FY22/FY23E remains largely unchanged. We expect HDFC to
report core RoA/RoE of 2%/13% over FY22–23E. Reiterate Buy, with SOTP-based TP
of INR3,275 (FY23 SOTP-based).
8 May 2021
2
 Motilal Oswal Financial Services
HDFC
HDFC: Quarterly Performance
Y/E March
INR b
4Q
105.9
65.7
40.3
13.7
4.4
44.6
18.1
0.9
45.5
17.3
5.0
41.1
40.6
14.9
7.2
33.4
19.0
4.7
1.1
-
0.1
39.2
45.7
7.4
31.8
42.4
FY20
437.5
310.0
127.5
11.4
9.7
137.2
11.5
3.0
140.1
11.1
15.0
0.8
125.2
12.5
15.9
109.2
2.9
126.4
10.8
(43.2)
0.2
203.5
55.1
25.8
177.7
84.5
FY21
435.8
286.1
149.7
17.4
11.9
161.6
17.8
2.9
164.5
17.4
18.0
20.0
146.5
17.0
20.5
126.0
15.4
23.5
7.3
(9.0)
0.3
148.2
(27.2)
27.9
120.3
(32.3)
4QFY21E
107.3
68.4
38.9
9.8
3.6
42.5
12.5
0.8
43.3
11.6
5.3
50.1
38.0
7.7
3.9
34.1
21.8
0.1
1.1
-
0.1
35.5
31.7
7.0
28.5
27.5
Act V/s Est
-1
-4
4
21
5
14
5
-6
7
87
-2
FY20
1Q
2Q
3Q
Interest Income
107.8 107.8 109.8
Interest Expense
77.4 78.3 77.7
Net Interest Income
30.4 29.5 32.1
YoY Change (%)
10.9 12.7 11.0
Assignment Income
3.0
2.6
1.7
NII (including assignment income)
33.4 32.1 33.8
YoY Change (%)
15.7 6.6
7.4
Other Operating Income
0.6
0.6
0.7
Core Income
34.0 32.8 34.5
YoY Change (%)
15.4 6.1
7.7
Operating Expenses
3.8
3.8
3.8
YoY Change (%)
(25.1) 17.7 13.2
Core Operating profits
30.2 29.0 30.7
YoY Change (%)
23.9 4.7
7.1
Provisions
3.2
2.5
3.0
Core PBT
27.0 26.5 27.7
YoY Change (%)
11.6 0.3
0.9
Profit on Sale of Inv./MTM on Inv.
18.5 13.0 90.6
Dividend income
0.0 10.7 0.0
One off expense/Prov
(5.7) (5.0) (27.0)
Other Income
0.1
0.1
0.1
PBT
39.9 45.3 91.4
YoY Change (%)
29.8 29.8 218.7
Provision for Tax
7.8
5.7
7.7
PAT
32.0 39.6 83.7
YoY Change (%)
46.3 60.6 296.1
E: MOFSL Estimates; FY19 estimates are under Ind-AS
4Q
112.0
76.6
35.4
12.1
2.4
37.8
17.1
1.0
38.8
15.1
3.5
11.9
35.3
15.4
7.2
28.0
(0.0)
4.3
0.0
(5.5)
0.1
26.9
(27.1)
4.6
22.3
(22.0)
1Q
111.5
78.2
33.4
9.7
1.8
35.2
5.4
0.5
35.7
4.9
4.0
3.8
31.7
5.0
3.0
28.7
6.4
13.4
3.0
(9.0)
0.0
36.1
(9.5)
5.6
30.5
(4.7)
FY21
2Q
3Q
110.0 108.4
74.0 68.3
36.0 40.0
22.1 24.6
1.6
4.1
37.6 44.2
17.0 30.5
0.8
0.7
38.4 44.8
17.1 29.9
3.7
5.4
(3.5) 39.9
34.7 39.5
19.8 28.6
4.4
5.9
30.4 33.5
14.9 20.9
1.7
3.9
3.2
0.0
-
-
0.0
0.1
35.3 37.5
(22.0) (59.0)
6.6
8.3
28.7 29.3
(27.6) (65.1)
11
6
12
0.0
Highlights from management commentary
Business updates
Individual loan approvals were up 10% YoY, and applications received were up
8% YoY in FY21. 11% YoY growth was reported in Mar’21.
It received a pre-payment of INR93.97b in LRD in FY21 due to the listing of REITs.
10.3% of individual loans pre-payments were reported in FY21 v/s 10.9% YoY
and 10–12% generally. 60% of pre-payments are generally full pre-payments.
INR9.36b ECLGS has been disbursed to date. Many of these loans are classified
as Stage 2.
There seem to be fewer bottlenecks amid the second wave. Disbursements in
Apr’21 were more than in 1QFY21.
Individual disbursements: FY21 – INR1.6t; 4QFY21 – INR400b
There is no ‘pricing war’ in the industry.
Asset quality
It saw some resolution in corporate loans in 2HFY21.
All restructured loans are classified as Stage 2.
HDFC has an internal timeline to fulfil the regulatory requirement of having a
minimum 50% of total assets in individual housing loans and 60% in overall
housing loans. Currently, 54–55% of total assets are in individual housing loans
and 57–58% of total assets are in overall housing loans.
Collection efficiency in Apr’21 was largely similar to Apr’19 levels.
The bulk of Stage 2/3 loans in non-individual loans is from corporate and
construction finance. Stage 2/3 loans are very minimal in LRD.
3
8 May 2021
 Motilal Oswal Financial Services
HDFC
COVID provisions are against loans to customers in industries impacted by
COVID (such as Hospitality and Airlines).
Funding
The excess liquidity deployed in liquid funds had a drag of 2.33%.
It would reduce shareholding in HDFC Ergo in May’21.
Construction finance LTV would be ~50%.
It remains to be seen whether the CLSS MIG scheme would be extended further.
Regardless, this would not have a significant impact on disbursements.
Sourcing mix: 27% – HDFCB, 54% – HDFC Sales (company subsidiary), 17% – DSA,
2% – Walk-ins
Maharashtra reported 28% of disbursements in 2HFY21, up 200bp YoY, driven
by stamp duty cuts.
Others
Valuation and view
HDFC is well-placed in the current environment to capture a profitable market
share. The company has access to low cost of funds, a strong ALM position,
comfortable leverage, and adequate provisioning on the balance sheet, with a
healthy Tier I ratio of ~22%.
Contrary to initial expectations of 15–20% YoY disbursement decline at the start
of FY21, HDFC reported 3% YoY growth.
In our view, HDFC should deliver 14–
15% AUM growth over FY22–23E.
With declining cost of funds and a reduction in excess liquidity on the balance
sheet, margins should be stable despite the pressure on retail lending yield.
Asset quality performance has been better than initially expected.
CE of 98% in
the Individual Lending book is certainly encouraging.
We believe the company
has made more-than-adequate provisions for any potential asset quality
slippages in the ensuing quarters.
Its total provision buffer of INR130b is higher
than its Stage 3 loans of INR116b.
Most of HDFC’s subsidiaries are among the Top 3 players in their respective
segments. Importantly, the value contribution of the subsidiaries/associates has
been increasing. They now contribute ~60% to our SOTP
For FY22–23E, our core PBT/PAT estimates remain largely unchanged. We
expect HDFC to report core RoA/RoE of 2%/13% over FY22–23E. Reiterate
Buy,
with SOTP-based TP of INR3,275 (FY23 SOTP-based).
8 May 2021
4
 Motilal Oswal Financial Services
HDFC
Exhibit 1: SOTP’23E-based
Particular
Core business
Key Ventures
HDFC Bank
HDFC Standard Life
HDFC AMC
HDFC ERGO GIC
Bandhan Bank
Credila
Other Invt
Total Value of Ventures
Less: 20% holding discount
Value of Key Ventures
SOTP
CMP
Upside - %
SOTP W/O Holdco discount
CMP
Upside - %
Stake
21.1
50.0
52.7
49.9
10.0
100.0
Value
(INR b)
3,092
2,097
732
401
129
66
82
17
3,525
705
2,820
5,912
4,503
31.3
6,617
4,503
46.9
Value
(USD b)
40.9
27.7
9.7
5.3
1.7
0.9
1.1
0.2
46.6
9.3
37.3
78.2
59.6
31.3
87.5
59.6
46.9
Value/Sh.
(INR)
1,714
1,164
406
222
71
37
46
9
1,956
391
1,565
3,279
2,496
31.3
3,670
2,496
47.0
% of total
52.3
35.5
12.4
6.8
2.2
1.1
1.4
0.3
59.7
11.9
47.7
100.0
Target
Multiple (x)
3.0
3.7
4.0
45.0
7.0
2.5
1.0
Rationale
PBV
PBV
PEV
PE
PBV
PBV
Last deal
Invested Capital
Source: MOFSL, Company
Exhibit 2: One-year forward P/B
7.0
6.0
5.0
4.0
3.0
2.0
P/B (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
5.9
Exhibit 3: One-year forward P/E
56.0
44.0
3.6
32.0
20.0
8.0
24.5
29.0
P/E (x)
Min (x)
Avg (x)
+1SD
40.8
34.9
Max (x)
-1SD
47.3
37.5
4.8
4.2
2.6
3.5
Source: MOFSL, Company
Source: MOFSL, Company
Key exhibits
Exhibit 4: Loan growth trend
Loan Book (INR b)
12.1
11.2
11.7
13.4
10.9
YoY Growth (%)
11.8
11.3
9.6
10.5
14.7
12.8
Exhibit 5: AUM growth at 10.3% YoY
AUM (INR b)
13.2
13.6
YoY Growth (%)
11.9
11.7
10.2
9.3
10.3
4,066 4,166 4,267 4,415 4,509 4,657 4,751 4,839 4,983
4,619 4,759 4,901 5,054 5,168 5,314 5,403 5,522 5,699
Source: MOFSL, Company
Source: MOFSL, Company
8 May 2021
5
 Motilal Oswal Financial Services
HDFC
Exhibit 6: Individual loan share up ~120bp QoQ (%)
Individual
1.5
24.0
1.5
23.6
1.5
22.9
1.5
22.8
Corporate
1.3
22.9
1.4
24.5
1.3
23.9
Others
1.3
22.6
1.2
21.5
28.9
49.8
21.3
Exhibit 7: Share of deposits up ~ 250bp YoY (%)
Term Loans
30.3
47.1
22.6
31.3
47.3
21.4
31.7
45.4
22.8
NCD/FCCB/CP
31.6
43.4
25.0
33.2
43.2
23.7
35.2
43.8
21.0
Deposits
33.1
43.4
23.6
34.0
42.2
23.8
74.5
75.0
75.6
75.7
75.8
74.2
74.8
76.1
77.3
Source: MOFSL, Company,*HL :Home Loans
Source: MOFSL, Company
Exhibit 8: GS3 inches up 6bp QoQ (%)…
GS3 (INR b)
1.57
1.59
GS3 (%)
2.28 2.20
2.19
2.28
2.34
Exhibit 9: …and NS3 decreases 3bp QoQ
NS3 (INR b)
0.92
0.91
NS3(%)
1.23 1.18
0.83
1.14
1.18
1.15
1.41
1.50
0.81
57.4
62.3
66.9
70.0
102.9 102.0 103.7 110.0 116.3
32.4
37.5
37.9
35.7
54.0
53.6
52.9
55.6
55.8
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 10: Assignment income trend (%)
Assignment Income % of Total Income
3.50
2.28
0.57
1.96
0.84
1.98
3.74
Exhibit 11: Outstanding provisions at 2.6% of loans
ECL Provisions (%)
2.25
2.44
2.64
2.60
2.56
2.62
1.41
1.36
1.44
1.55
1.72
Source: MOFSL, Company
Source: MOFSL, Company
8 May 2021
6
 Motilal Oswal Financial Services
HDFC
Financials and valuation
Income statement
Y/E March
2015 2016
Interest Income
260
281
Interest Expended
180
194
Net Interest Income
80
87
Change (%)
14.2
8.8
Assignment income
0
0
NII (including assignment income)
80
87
Change (%)
14.2
8.8
Other core operating income
3
4
Core Income
83
91
Change (%)
13.5
9.5
Operating Expenses
7
8
Change (%)
12.5
7.4
% of core income
8.5
8.4
Core operating profits
76
83
Change (%)
13.6
9.7
Provisions/write offs
2
7
Core PBT
74
76
Change (%)
12.9
2.5
Profit on sale/MTM on Invt.
4
16
Dividend Income
7
8
One off exp/prov
0
-5
Miscellaneous Income
1
1
PBT
86
97
Tax
26
30
Tax Rate (%)
30.5
31.2
Reported PAT
60
66
Change (%)
10.1
10.9
PAT adjusted for EO*
61
66
Change (%)
13.8
8.9
Proposed Dividend
28
31
* (Core PBT +Dividend Income+Other income) adjusted for applicable tax
2017
309
209
100
14.5
0
100
14.5
3
103
13.5
8
10.3
8.1
95
13.8
7
88
15.3
10
9
-3
1
105
33
31.4
72
7.9
74
12.2
29
2018
331
235
96
-3.2
5
102
2.2
2
104
0.9
19
127.6
18.3
85
-10.3
21
64
-27.3
57
11
-17
0
115
22
19.3
93
29.8
68
-8.7
41
2019
393
278
114
18.7
9
123
21.0
3
126
21.4
15
-22.0
11.8
111
31.1
9
102
59.9
18
11
-4
0
127
35
27.4
92
-1.0
87
29.0
43
2020
437
310
127
11.4
10
137
11.5
3
140
11.1
15
0.8
10.7
125
12.5
59
66
-35.2
126
11
-43
0
160
26
16.1
135
46.0
96
10.5
44
2021 2022E 2023E
436
448
511
286
279
321
150
169
190
17.4
13.0
12.2
12
14
17
162
183
207
17.8
13.2
13.2
3
3
3
164
186
210
17.4
13.1
13.1
18
19
19
20.0
3.6
0.1
10.9
10.0
8.9
146
167
192
17.0
14.2
14.6
29
22
24
117
146
168
77.1
24.6
15.3
24
3
3
7
12
14
-9
0
0
0
0
0
139
161
186
28
32
37
20.0
20.0
20.0
111
129
149
-17.3
15.8
15.4
107
127
146
11.1
18.4
15.5
41
49
57
(INR b)
2024E
581
367
215
13.2
20
235
13.5
4
239
13.4
21
12.3
8.8
218
13.5
26
192
14.0
4
17
0
0
213
43
20.0
170
14.3
167
14.3
65
8 May 2021
7
 Motilal Oswal Financial Services
HDFC
Financials and valuations
Balance sheet
Y/E March
Capital
Reserves and Surplus (Ex OCI)
Net Worth (Ex OCI)
Other Comprehensive Income
Net Worth (Incl OCI)
Borrowings
Change (%)
Other liabilities
Total Liabilities
Loans
Change (%)
Investments
Change (%)
Net Fixed Assets
Other assets
Total Assets
Y/E March
AUM (INR B)
Change (%)
Individual loans (%)
Non Individual loans (%)
On Balance Sheet (%)
Assignment/Securitisation (%)
E: MOSL Estimates
2015
3
316
319
0
319
2,086
13.4
133
2,538
2,282
15.8
143
2.7
7
110
2,542
2015
2,533
16.3
71.4
28.6
90.1
9.9
2016
3
357
360
0
360
2,376
13.9
142
2,879
2,592
13.6
153
7.4
7
144
2,897
2016
2,915
15.1
72.8
27.2
88.9
11.1
2017
3
433
436
-2
434
2,794
17.6
124
3,352
2,989
15.3
202
31.5
10
150
3,352
2017
3,385
16.1
72.6
27.4
88.3
11.7
2018
3
652
655
-3
653
3,197
14.4
139
3,989
3,628
21.4
307
52.2
10
43
3,989
2018
4,029
19.0
72.9
27.1
90.1
9.9
2019
3
774
778
-4
774
3,662
14.5
152
4,588
4,066
12.1
462
50.5
10
50
4,588
2019
4,619
14.7
74.5
25.5
88.0
12.0
2020
3
928
932
-70
862
4,191
14.4
188
5,241
4,509
10.9
649
40.4
22
60
5,241
2020E
5,168
11.9
75.8
24.2
87.3
12.7
2021
4
1,096
1,099
-53
1,046
4,414
5.3
216
5,676
4,853
7.6
686
5.7
22
115
5,676
2021
5,699
10.3
77.3
22.7
85.2
14.8
2022E
4
1,175
1,179
-53
1,126
5,215
18.2
238
6,579
5,668
16.8
755
10.0
24
131
6,579
2022E
6,497
14.0
77.0
23.0
87.3
12.8
2023E
4
1,268
1,271
-53
1,218
5,960
14.3
261
7,440
6,444
13.7
831
10.0
27
139
7,440
2023E
7,406
14.0
76.5
23.5
87.0
13.0
(INR b)
2024E
4
1,410
1,414
-53
1,361
6,795
14.0
287
8,443
7,346
14.0
914
10.0
29
155
8,443
2024E
8,443
14.0
76.0
24.0
87.0
13.0
Ratios
Y/E March
2015
2016
2017
Spreads Analysis (%)
Avg Yield on Hsg Loans
11.6
11.0
10.5
Avg. Yield on Funds
11.5
11.0
10.5
Avg. Cost of funds
9.2
8.7
8.1
Interest Spread on loans
2.5
2.3
2.5
Net Interest Margin
3.6
3.4
3.4
Profitability Ratios (%)
RoAE
20.0
20.9
18.7
Core ROE
22.8
20.7
19.7
RoA
2.53
2.42
2.37
Core ROA
2.13
2.02
2.04
Efficiency Ratios (%)
Int. Expended/Int.Earned
69.2
69.0
67.7
Op. Exps./Net Income
7.4
6.6
6.8
Empl. Cost/Op. Exps.
46.5
46.0
46.5
Asset Quality (INR m)
Gross NPAs
16
19
24
Gross NPAs to Adv. (%)
0.7
0.7
0.8
Net NPAs
11
13
16
Net NPAs to Adv. (%)
0.5
0.5
0.6
VALUATION
2015
2016
2017
Book Value (INR)
201.9
227.7
274.7
Price-BV (x)
Adjusted BV* (INR)
149.7
176.6
220.1
Adj Price-ABV (x)
Adjusted EPS (INR)#
31.2
33.7
39.1
Adjusted EPS Growth YoY
11.2
8.2
15.9
Adj Price-Adj EPS (x)
Dividend per share (INR)
15.0
17.0
18.0
Dividend yield (%)
E: MOSL Estimates; * BV is adj. by ded. invt in Subs/Asso. from NW
2018
9.6
9.4
7.8
1.7
2.7
20.2
12.6
1.84
1.61
70.9
11.1
72.0
41
1.1
29
0.8
2018
391.1
340.2
34.5
-11.7
20.0
2019
9.7
9.5
8.1
1.6
2.8
13.5
13.0
2.03
1.84
70.9
9.6
48.2
48
1.2
34
0.8
2019
451.7
5.5
352.4
4.6
44.4
28.7
36.9
21.0
0.8
2020
9.7
9.4
7.9
1.8
2.7
21.7
13.1
1.96
1.80
70.9
5.4
39.6
89
2.0
66
1.5
2020
537.9
4.6
399.0
3.6
49.2
10.8
29.5
21.0
0.8
2021
8.7
8.5
6.7
2.1
2.9
12.6
12.7
1.96
1.87
65.7
9.2
50.8
97.6
2.0
68.3
1.4
2021
609.3
4.1
475.9
2.8
54.5
10.8
24.1
23.0
0.9
2022E
8.0
7.8
5.8
2.2
2.9
11.9
12.7
2.07
1.92
62.3
9.3
47.8
95.4
1.7
66.8
1.2
2022E
653.6
3.8
520.2
2.2
63.1
15.8
18.1
27.2
1.1
2023E
8.0
7.7
5.8
2.2
2.9
12.7
13.3
2.08
1.92
62.9
8.2
40.6
99.3
1.5
69.5
1.1
2023E
704.7
3.5
571.3
1.6
72.7
15.3
12.8
31.3
1.3
2024E
8.0
7.7
5.8
2.2
2.8
13.2
13.6
2.10
1.93
63.1
8.1
39.8
1,07,597
1.5
75,318
1.0
2024E
776.3
3.2
644.1
0.0
82.1
12.9
0.0
35.5
1.4
8 May 2021
8
 Motilal Oswal Financial Services
HDFC
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products.
MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading
Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity
& Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository
Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory &
Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the
website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"
and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and
investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for
distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document
relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order
to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities
International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
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SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
8 May 2021
9
 Motilal Oswal Financial Services
HDFC
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
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MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category
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employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may
arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person accessing this information due to any
errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management
Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of
Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a
group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory
services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee
of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj
Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
8 May 2021
10