HDFC Bank
Whether it is worth to put your hard earned money in this company?
NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES
(NMIMS)
I
N of aDgoodI company
A
Whether it is the classic
case
but not a good stock?
SIDDHANT | DAWOOD | PRATEEK | SAHITHA | HARRIS
Business Overview
HDFC Bank Business Growth
4420
INR Billion
3690
2930
2420
HDFC Bank
1640
2007-08
Source : Annual Reports
Business
Business
Overview
Overview
Liberalization
1990
Global Trust
UTI Bank
Success
ICICI Bank
Bank
2008-09
Expensive
2009-10
Investment
Rationale
2010-11
Financial
Analysis
1995
2011-12
Valuation
Risk Analysis
Most successful bank in India
Asset Growth – HDFC Bank
80%
Asset Growth
4.00
Rs. 3.4 Tri
3.50
Asset Growth
Credit Quality
3.00
INR Trillion
40% 2.50
CAGR ~ 30%
2.00
HDFC Bank is the most successful and
consistent bank in India.
1.50
0% 1.00
2004
2005
2006
2007
2008
2009
0.50
Operating Profit Margins
2010
2011
2012
ROE & ROA
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-40%
ICICI
Source : Bloomberg, Team Estimates
Source : Bloomberg, Team Estimate
Business
Overview
Success
Expensive
Investment
Rationale
SBI
Financial
Analysis
System
Valuation
Risk Analysis
Most successful bank in India
Asset Growth
Asset Quality - GNPA
80%
10.00%
40%
9.00%
Asset Growth
8.00%
Credit Quality
0%
2004
2005
7.00%
2006
2007
2008
2009
2010
2011
2012
6.00%
-40%
Source – Bloomberg, Team Estimates
HDFC
ICICI
SBI
System
5.00%
4.00%
3.00%
2.00%
1.00%
Operating Profit Margins
ROE & ROA
1%
0.00%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source : Bloomberg, Team Estimate
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Most successful bank in India
Asset Growth
Operating
Profit Margins
HDFC Bank’s
Operating
Profit Margin
80%
50.00%
40%
50.00%
40.00%
Asset Growth
43%
39%
0%
2004
2005
30.00%
40.00%
2006
2007
2008
2009
2010
2011
2012
35%
-40%
20.00%
Source – Bloomberg, Team Estimates
30.00%
31%
30%
HDFC
ICICI
SBI
System
Source – Bloomberg, Team Estimates
10.00%
20.00%
0.00%
2003
10.00%
-10.00%
2004
2005
2006
2007
2008
2009
Operating Profit Margins
2010
2011
2012
ROE & ROA
0.00%
-20.00%
2008
Source :: Bloomberg
Bloomberg,Team
TeamEstimates
Estimate
Source
Business
Overview
Success
2009
HDFC
Expensive
ICICI
2010
SBI
Investment
Rationale
System
2011
Financial
Analysis
2012
Valuation
Risk Analysis
Most successful bank in India
Asset Growth
ROA
80%
ROE OF DIFFERENT
BANKS
2.00%
20%
40%
19%
Asset Growth
Credit Quality
16%
1.50%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
15%
15%
-40%
Source – Bloomberg, Team Estimates
HDFC
ICICI
SBI
15%
16%
canera
System
11%
System
1.00%
10%
0.50%
5%
Operating Profit Margins
ROE & ROA
0.00%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
HDFC
ICICI
SBI
Success
HDFC
System
Source : Bloomberg, Team Estimate
Business
Overview
0%
ICICI
SBI
Kotak
Source : Bloomberg, Team Estimate
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Corporate Governance
Independence of
the Board of
Directors
Independent
Committees
Transparency
and
Accountability
Whistle Blower
Policy
Compensation
Structure
HDFC
ICICI
Axis
55%
67%
55%
Complied
Complied
Complied
Complied
Complied
Complied
Corporate Governance Rating
Complied
Complied
Complied
Complied
Complied
Complied
Half yearly
reports
Available
Available
Available
Quarterly
reports
Available
Available
Available
Annual report
Available
Available
Available
Source: Team Estimates
Business
Overview
Investment
Rationale
Competitor
Analysis
Financial
Analysis
CRISIL GVC Level 1
HDFC bank was among the first four
companies, which subjected itself to a
Corporate Governance and Value
Creation (GVC) rating by the rating
agency, The Credit Rating Information
Services of India Limited (CRISIL).
Valuation
Risk Analysis
Appendices
Corporate Social Responsibility (CSR)
CSR @ HDFC Bank
Employee Engagement
Environment Sustainability
Rural Initiative
Financial Inclusion
No Frills Savings Accounts
Financial Awareness
Sustainable Livelihood Financing
Comparitive
Analysis
: Parameters
Comparative
Analysis
: Ranking
Environment (37)
Community(47)
Governance (48)
Employees (52)
Business
Overview
Investment
Rationale
Competitor
Analysis
Financial
Analysis
Valuation
Risk Analysis
Appendices
Most Expensive
Bank in the World
Business
overview
6
North
American
Region
PB
PB
PB
PB
-PB
-Eastern
-Western
-Asia
Middle
PB
Caribbean
European
Europe
East &top
Region
Africa
Region
HDFC Bank`s
vs-Emerging
Other
Global Banks
5
5.3
5.3
5.3
5.3
5.3
4
3
3.3
3.1
2.8
2.6
2.3
2.2
2.0
2.1 2.0
1.71.9
1.9 1.91.6 1.9 1.6 1.5 1.7
1.9
1.8 1.4 1.6
1.5 1.7
1.4
1.4
1.4
1.6 1.3
1.5 1.3
1.3 1.5 1.4
1.2
1.3
1.4
1.4
1.1
1.1
1.2
1.2
1.0
0.9
0.9
1.1
0.9
0.9
0.8
0.7 1.0 0.8
0.7 1.1 0.8
1.0 1.1
0.7 0.7
0.8
0.8
0.6 0.7 0.4 0.6
0.60.7
0.60.7
0.5 0.3
0.3
2.7
HDFC Bank is the most successful and
consistent bank in India, but also the most
expensive bank in the world
2
2.0
2.1
1.7
1.6
1.5
1.1
1
2.3
0
Source : Bloomberg,
Source : Bloomberg,
Team Estimates
TeamSource
Estimates
: Bloomberg, Team Estimates Source : Bloomberg, Team Estimates
6
PB vs ROA
6
4
Business
Overview
40
PE vs ROE
4
2
0
0.00%
PB vs Asset Growth
20
2
1.00%
2.00%
Success
3.00%
0
0.00%
Expensive
10.00%
20.00%
30.00%
Investment
Rationale
40.00%
Financial
Analysis
0
0.00%
10.00%
Valuation
20.00%
30.00%
Risk Analysis
Most Expensive Bank in the World
6
35
PE
v/sROA
EPS
Growth
PEG
vs
EPS
growth
HDFC Bank`s
PB
PB
vsPB
Asset
Other
vs
Growth
top
Global Banks
5
61.40
6
30
51.20
5
25
4
HDFCHDFC
Bank Bank
HDFC Bank
HDFC Bank
3
20
ICICI Bank
PE
2
1.00
44
ICICI Bank
PB
PEG
PB
0.80
15
1 33
Philtrust Bank
Royal Bank of Canada
Wells Fargo
0.60
0
Axis Bank
10
22
0.40
Wells Fargo
Royal Bank of Canada
HSBC
11
0.20
BNP Paribas
00.00
0
-40.00%
0.00%
0.00%
0.00%
-30.00% 5.00%
-20.00%
10.00%
0.50%
Industrial & Commercial Bank of China
Wells Fargo
BOB
5
Wells Fargo
DBS
0
-10.00%
20.00% 0.00%15.00%
10.00% 1.00%
Source : Bloomberg, Team Estimates
6
6
4
4
PB vs ROA
PB vs Asset Growth
6
30.00%
40.00%
2.00%
25.00%
40.00%
50.00%
2.50%
30.00%50.00%
60.00%
60.00%
35.00%
3.00%
Source
Source :: Bloomberg,
Bloomberg, Team
Team Estimates
Estimates
PB vs Asset Growth
40
PE vs EPS Growth
4
2
0
0
0.00%
0.00%
10.00%
20.00%
30.00% 20.00%
1.50%
EPS Growth
.Growth
EPS
Asset
ROA
20
2
10.00%
20.00%
1.00%
Business
Overview
30.00%
2.00%
Success
40.00%
3.00%
0
0.00%
Expensive
10.00%
20.00%
30.00%
Investment
Rationale
40.00%
Financial
Analysis
0
0.00%
10.00%
Valuation
20.00%
30.00%
Risk Analysis
Estimates built in are overly optimistic
Loan Growth Consensus Estimates
ROE Consensus Estimates
30%
20%
16% 16%
15%
19%
17% 17%
16% 17% 16%
15%
10%
In Percentage
25%
25.0
23% 23% 24%
20.5
21.9 22.7
20.0
15.7 15.6 15.7
15.0
13.1 14.1 14.3
10.0
5%
0%
5.0
0.0
HDFC
SBI
ICICI
FY13E
FY14E
Source : Bloomberg, Team Estimate
System
FY15E
HDFC
SBI
ICICI
FY13E
FY14E
Source : Bloomberg, Team Estimate
NIM Consensus Estimates
4.3
4.4
4.0
6.0
4.4
3.3
3.3
3.2
3.0
3.0
2.0
1.0
3.0
5.3
5.3
5.4
4.0
3.1
3.3
3.4
3.0
2.0
1.1
1.1
1.0
1.0
0.0
0.0
HDFC
SBI
FY13E
FY14E
Source : Bloomberg, Team Estimate
Business
Overview
FY15E
5.0
3.1
In Percentage
5.0
System
GNPA Consensus Estimates
However, the longevity ?of this blazing
success story is questionable
In Percentage
15.2 16.0 16.2
Success
ICICI
FY15E
Expensive
HDFC
SBI
FY13E
FY14E
Source : Bloomberg, Team Estimate
Investment
Rationale
Financial
Analysis
ICICI
FY15E
Valuation
Risk Analysis
Slowdown in the Economy
Indian GDP vs Credit Growth (Last 20 years)
40
35
FY03
Credit growth %
30
FY01
25
FY04
20
FY1999
15
10
5
0
3
4
5
6
7
8
9
10
GDP %
Source : Bloomberg, Team Estimate
Consensus estimated Loan
growth HDFC Bank ~ 25%
Estimated System Credit
growth ~ 16%
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Increased Competition
Balance Sheet
Profit and Loss Statement
“In Assets
two weeks fromLiabilities
today, the Reserve Bank
Incomeof India will announce
the final
for licensing more private sector banks. We
-Loans guidelines
-Deposits
- Expenditure
expect that four to five licenses
will be granted.”
-Home Loans
-Current A/c
Wages & Salaries
Profit
-Auto Loans
-Savings A/c
P Chidambaram, Finance Minister, India
-SME Loans
(CASA)
January 29, 2013
-Large
-Wholesale
Corporate
Loans
Decrease in yield
Business
Overview
Increase in cost of
funds
2%
2%Five
5%
10%
Success
Increase in staff
expenses
% Change in Net
Profit Growth
New Banks2%
-14.7%
5%
5%
-21.2%
10%
10%
-32.5%
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Slowdown in PPOP Growth
INR Bn
Pre provision Operating Profit
(PPOP) Growth
Profit After Tax
60
38%
50
40
24%
CAGR~ 30%
20%
30
16%
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source : Bloomberg, Team Estimate
Business
Overview
Success
2008-09
2009-10
2010-11
2011-12
Source : Bloomberg, Team Estimate
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Financial Analysis
PBV
Chart
year)
Retail
Loan(1
Growth
Non
Performing
Assets
CASA Ratio
725
CASA Growth
Maximum
(4.8x)100%
120% 2.5%
75%
675
100% 2.0%
70%
625
PRICE (INR)
68.43%
85%
1.41%
61%
58%
80%
55%
60% 1.0%
525
50%
55%
56%
41%
43%
79.51%
73%
1.05%
53%
60%
52%
60%
44%
44%
0.19%
40%
45%
30%
0.18%
20%
1.19%
1.14%
1.05% 68%
68%
1.02% 50%
48%
20% 425
35%
0.0%
40%
58%
40%
34%
30% 375
0%
2002
FY10
2003GNPA(%) 2004
FY11
FY12
0%
2006NNPA(%) 2007
2005
Source:
Annual Reports,
Team Estimates
Source:Bloomberg,
finance.yahoo.com,
Annual Reports
Source:
Bloomberg,
Team Estimates
Source:
AnnualAnnual
Report,Reports,
Team Estimates
50%
Lower (3.7x)
39%
38%
30%
Minimum
33%
(3.25x)
20%
26%
27%
0.24%
0.21%
0.25%
15% 26%
10%
FY09
70%
Average
(4x)
60%
54%
0.31%
80%
70%
0.63%
45%
40% 475
0.5%
90%
CASA - Current Account
Account
78.76%& Savings
Upper
(4.4x)
80.48%
80%
82.38%
78.42%
65%
80% 1.5%
60% 575
40%
90%
82.51%
110%
1.95%
18%
FY13(E)
FY14(E)
33%
10%
0% 11%
FY15(E)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Provision Coverage
Ratio 2011
2008
2009
2010
2012
Source: Bloomberg, Annual Reports, Team Estimates
o leave based on Financial Analysis and Valuation
Valuation.
70%
CASA Ratio
60%
100.0
50%
50.0
3.0%
CASA Growth
Non Performing Assets
100%
2.0%
50%
1.0%
0.0%
40%
0%
0.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Bloomberg, Annual Reports, Team Estimates
Business
Overview
Success
Source: Bloomberg, Annual Reports, Team Estimates
Expensive
Investment
Rationale
Source: Annual Report, Team Estimates
Financial
Analysis
Valuation
Risk Analysis
BASEL III Implementation
Transitional guidelines for Basel III implementation as suggested by RBI
In million Rs.
2012-13(E)
2013-14(E)
2014-15(E)
2015-16(E)
2016-17(E)
2017-18(E)
Minimum Tier I
6.00%
6.50%
7.00%
7.00%
7.00%
7.00%
Minimum Tier II
3.00%
2.50%
2.00%
2.00%
2.00%
2.00%
CCB
0.00%
0.00%
0.63%
1.25%
1.88%
2.50%
Tier I + CCB
6.00%
6.50%
7.13%
8.25%
8.88%
9.50%
Total
9.00%
9.00%
9.63%
10.25%
10.88%
11.50%
3,121,453
3,776,958
4,570,119
5,529,844
6,691,112
8,096,245
Tier I capital (Growing @ 18%)
353,111
416,671
491,671
580,172
684,604
807,832
Tier II capital - Maturities (no
borrowings)
136,757
136,757
132,617
120,597
116,497
116,447
Tier I Capital to RWA
11.31%
11.03%
10.76%
10.49%
10.23%
9.98%
Tier II Capital to RWA
4.38%
3.62%
2.90%
2.18%
1.74%
1.53%
Total
15.69%
14.65%
13.66%
12.67%
11.97%
11.51%
Expected RWA's (Growing @ 21%)
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
ABSOLUTE
RELATIVE
GORDON
VALUATION
SOTP
VALUATIONVALUATION
VALUATION
GROWTH
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Absolute Valuation
SOTP Valuation Methodology
Particulars
Basis
Multiple
Stake(%)
Value
HDFC Bank
RI
3.5x
100%
INR 599
DCF
-
63%
INR 3
Gordon Growth
-
97%
INR 2
SOTP Valuation
Gordon Growth
HDFC Securities
HDB Financial
INR 604
Total Value of HDFC Bank
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Residual Income : HDFC Bank standalone
Cost of Equity
Risk free rate
Market Risk Premium
Beta
Cost of Equity
Year of Valuation
Number of Shares
7.9%
7%
0.97
14.7%
2013
2357 million
(in rs. millions)
FY 2012
FY 2013 FY 2014 FY 2015
Net Income
5,1670
64,082
78,346
94,402
Less Equity Cost
50,124
59324
69932
82714
Residual Income
1,022
4,758
8,414
11,688
Terminal Value
41855
Intrinsic value of HDFC Bank
403,149
Value per share
Rs. 599
Advances :16%
Deposits:17%
Success
Expensive
Investment
Rationale
Persistent
Factor =1
Rs. 599
HDFC Bank Intrinsic Value by RI Model
Business
Overview
PERPETUAL
GROWTH
PERIOD
HIGH GROWTH PERIOD
25 YEARS
Financial
Analysis
Valuation
Risk Analysis
Absolute Valuation
Residual Income
Components
of Two
Stage Model
SOTP Valuation
Methodology
ROE
19%
Particulars
High growth period
Payout for 25 years
HDFC Bank
Growth rate for 25 years
Perpetual
Growth Period
HDFC Securities
Basis
Multiple
Stake(%)
25
Value
RI
3.5x
100%
20%
INR 599
DCF
-
Till Perpetuity
63%
INR 3
Growth till perpetuity
HDBratio
Financial
Payout
after 25 Years
20%
3%
Gordon Growth
-
Cost of equity
97%
84%
14.7%
Total Value of HDFC Bank
Target P/BV
3.6
FY13E BVPS
149
Target Price
INR 538
Gordon Growth
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
INR 2
INR 604
Risk Analysis
Relative Valuation
PBV v/s Growth in Asset
PE vs Growth in EPS
6
35.00
HDFC Bank
5
30.00
Philtrust Bank
HDFC Bank
25.00
4
20.00
3
15.00
Axis Bank
2
Wells Fargo
DBS
1
5.00
y = 3.2987x + 2.0738
0
0.00%
AXIS Bank
10.00
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
-10.00%
Wells Fargo
0.00
0.00%
Multiple
FY14(E)
PB v/s Asset growth trend line
3.1
175
PB v/s ROA trend line
2.9
175
PB v/s % Growth in EPS
3.5
175
PE v/s % Growth in EPS
22.4
27.2
Success
Expensive
Investment
Rationale
y = 42.17x + 11.78
10.00%
20.00%
30.00%
40.00%
Average
Target Price
3.1
550
27.2
608
Rs. 579
HDFC Bank Value by Relative Valuation Model
Business
Overview
Hang Seng Bank
Financial
Analysis
Valuation
Risk Analysis
Valuation
50%
Residual Income
Rs.584
Gordon INR
Growth
($ 10.8)
561.3913
Growth in EPS
20%
Payout Ratio
20%
21%
22%
23%
24%
25%
15%
231
237
248
254
260
16%
272
30%278
242
285
291
297
304
17%
321
328
336
343
350
357
18%
381
389
397
405
413
421
19%
452
461
470
479
488
497
20%
538
548
558
568
578
589
One Year Target Price
Downside > 15%
Relative Valuation
Business
Overview
Sensitivity Analysis - Gordon Growth Model
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Company Risk
Investment Risk
COMPANY
INVESTMENT
RISK
RISK
ANALYSIS
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Company
HDFC
BankRisk
CAMELS
Analysis
Rating
CAMELS rating was used to analyse company risk
C
A
M
Capital
Adequacy
Asset
quality
Management
quality
18%
B2
18%
A3
B2
18%
CRAR
70%
16.5%
NNPA
D/E
15%
9.4%
Gsec
/Total Inv78.19%
Inv 30%
Coverage
Ratio
15%
8.5%
0.18%
10%
Business
/Employee 6.54%
25%
E
Earnings
10%
A3
ROA
Overall Rating | B1
Std Adv
/Total Adv 98.3%
60%
Profit
/Employee 0.08%
25%
CDR
0.33%
50%
NII
/Total
Assets
Success
Expensive
3.6%
25%
Operating
profit
/Total
Assets
2.65%
25%
Cost/
Income
Business
Overview
1.53%
25%
Investment
Rationale
L
S
Liquidity
Systems and
Control
18%
B1
18%
A3
Cash
/Tot Assets 4.4%
25%
Systems and
Controls
100%
GSec
/Tot Assets22.6%
Assets 25%
Liquid Assets
/Tot Depo 8.49%
50%
49%
25%
Financial
Analysis
Valuation
Risk Analysis
Investment Risk
FINANCIAL
STRATEGIC
MACRO
MODEL RISK
RISK
INR Bn
25
12.00%
20
10.00%
2500000
15
8.00%
10
6.00%
2000000
5
4.00%
0
2.00%
FY07
1500000
0.00%
STRATEGIC RISK
Improvement in the NPA from historic
low levels
515
Worst Case
Normal
Case
Provisioning
MACRO RISK
620
584
CAGR~ 24%
FY08
FY09
FY10
FY11
FY12
Sensitivity Analysis - Gordon Growth
Model
Growth in PAT and PPOP
1000000
60
In Rs.
561.3913
50
15%
15.0%
500000
40
16%
10.0%
3017%
18%
5.0%
0
20
19%
0.0%
1020%
INR Bn
FINANCIAL RISK
Growth in EPS
QuickFluctuations
Moderating
revival inValuation
inflation
of exchange
the
Risk
outlook
economy rates
Analysis
GrowthScenario
in Advances
Best Case
Million
INR
Strong Growth in Retail book
Provisioning
Inflation CPI
Payout Ratio
GDP Growth
20%
21%
22%
23%
231
237
242
248
272MODEL
278 RISK
285
291
321
328
336
343
381
389
397
405
461FY 10 470
479
FY452
09
FY
11
538
548
558
568
2006-07
2007-08
2008-09
FY09
FY10
24%
254
297
350
413
488FY 12
578
25%
260
304
PPOP
357
PAT
421
497
589
2009-10
2010-11
2011-12
Source: Annual
Reports
0
FY08
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
FY11
Valuation
FY12
Risk Analysis
Investment Risk Matrix
IMPACT
STRATEGIC RISK
MACRO RISK
Strong growth in retail loan book
•Strong growth in retail loan book
Continued andinsustainable
•Improvement
NPA from growth
in
non interest
income
historic
low levels
•Continued
andinsustainable
Improvement
NPA from
growth in
non
interest income
historic
low
levels
Quick
•Quickrevival
revivalinineconomy
economy
•Moderating inflation growth
Moderating inflation growth
FINANCIAL RISK
MODEL RISK
Fluctuation
•Fluctuationofofexchange
exchangerates
rates
Valuation Risk
•Valuation
LIKELIHOOD
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Monte Carlo Simulation
0.05
500
0.04
400
0.03
300
Certainty Min Rs 515
Certainty
Max Rs 620
0.02
200
0.01
Frequency
Probability
HDFC Target Price
100
Certainty = 90.00%
0
0
500
530
Source: Team Estimate
560
590
620
650
Rupees (Rs.)
Fit: Weibull
Forecast Values
Price Confidence Interval: (Rs 515 ; Rs 620)
Business
Overview
Success
Expensive
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
SELL
Successful
Target Price
Rs.584 ($10.8)
Expensive
Current Price
Rs.674 ($12.5)
<19 FEB 2013>
Longevity ?
Downside
Leave
> 15%.
Appendices
Appendix Summary
Business Overview
Financial Analysis
Valuation
•Stock Market performance
•Industry Overview
•Shareholding Pattern
•Parent Holding Structure
•Business Comparison
•HDFC bank commands high
Premium – WHY??
•Slowdown in the Economy
•Latest Results
•Loan Book Mix
•Trends- Loan book
•Treatment of Stock Option
•Income Statement
•Balance Sheet
•Financial Ratios
•Corporate Exposure
•Beta Test
•Cost of Equity
•Residual Income
•Gordon Growth Derivation
•HDFC Sec Valuation
•HDB Financials
•Relative –PBV v/s Asset Growth
•Relative –PBV v/s ROA
•Relative –PBV v/s EPS Growth
•Relative –PE v/s EPS Growth
•Sensitivity – Weightage Assigned
To Valuation Models
Valuation Estimates
Competitor Analysis
•Competitor Ratios
•Porters 5 Forces Model
•SWOT Analysis
General Analysis
•Top Management
•Corporate Governance
Committees
•CSR Grading
•Awards won in 2012
•Inorganic Growth – Past & Future
•Reverse Merger with Parent
•Comparison – South East Asia
•Reasons for moderation in PAT
Growth
Business
Overview
Investment
Rationale
•Number of Branches
•Demand Deposit
•Borrowings
•Other Liab and Provisions
•Investments
•Advances
•Cash with RBI
•Interest Received
•Other Income
•Interest Paid
•Operating Expenses
•Provision and contingencies
•Asset Quality
Financial
Analysis
Valuation
Risk: Investment
•CAMELS-HDFC Bank
•CAMELS-ICICI Bank
•CAMELS-AXIS Bank
•CAMELS-YES Bank
•CAMELS-KOTAK Bank
•CAMELS-SBI
•Altman Z Score
•Montecarlo – Sensitivity of Target
Price
Risk Analysis
Summary
Appendix
HDFC Bank – Stock Performance
Source:yahoofinance,capitaline
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Industry Overview
Bank credit (as a % of GDP)
Demographics - boost to Retail Banking
80
AGE:
Below 20
20-50
70
65
51.1
50
45.1 44.7
75
50 and above
38.2
60
36
55
13.9
50
17.9
16.3
45
40
2001
2011
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2016
Source: Google Public Data
Source: Census of India, Team Estimates
16000
14000
180
BANKEX
160
WPI
140
12000
100
8000
80
6000
Public Banks
60
4000
40
2000
20
Foreign Banks
0
Mar/04
Sep/04
Mar/05
Sep/05
Mar/06
Sep/06
Mar/07
Sep/07
Mar/08
Sep/08
Mar/09
Sep/09
Mar/10
Sep/10
Mar/11
Sep/11
Mar/12
Sep/12
0
Source: BSE, Team Estimates
Business
Overview
Global best practices
benchmark range
120
10000
Investment
Rationale
Financial
Analysis
Private banks
Source: IBA-FICCI,
Team Estimates
Valuation
0
Risk Analysis
2
4
6
Summary
8
Appendix
Parent Holding Structure
Housing Development
Finance Corporation (HDFC)
(74%)
HDFC ERGO
General Ins
(72.4%)
HDFC Std
Life
(60%)
HDFC
Asset
Mgmt
(23.1%)
HDFC Bank
(63.02%)
HDFC Sec
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
(100%)
HDFC
Property
Ventures
(80.5%)
HDFC
Venture
Capital
(87.2%)
Credila
Financial
Services
(97.03%)
HDB
Financials
Risk Analysis
Summary
Appendix
Business overview
Share Holding Pattern
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Subsidiaries
Risk Analysis
Summary
Appendix
Business Comparison
Business Comparison
ROA
All Pvt Banks Avg
All Pvt Banks Avg
All SCB Avg
New Pvt Banks Avg
587,294
Deposits
New Pvt Banks
Avg
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
HDFC Bank
2,467,064
750,426
1226708.623
All SCB Avg
RO
A
Advances
483,209
HDFC Bank
1,954,200
590,067
1051890.677
Source: RBI website, Team Estimares
Business
Overview
Investment
Rationale
Financial
Analysis
Source: RBI website, Team Estimates
Valuation
Risk Analysis
Summary
Appendix
HDFC Bank commands a premium –WHY???
Factors Justifying a Premium
Earnings
Consistency
Growth in PAT has been 30%+ consistently for last 38
quarters, even during financial crisis.
Asset Quality
Consistently able to maintain lower levels of NPA compared
to banking system.
Management
Quality
Strong Management team led by Mr. Aditya Puri and very low
levels of attrition at top management levels.
Quality Business
Setting high levels of standard in corporate governance and
CSR activities.
Ability to raise
capital
Faith in the banks quality and brand allows it to raise capital
almost at will from the market.
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Competitor Analysis
HDFC
ICICI
AXIS
SBI
YES
KOTAK
NIM
4.2%
3%
3.5%
3.8%
2.9%
4.7%
OPM
30.2%
11.5%
8.8%
3.7%
10.5%
12%
Cost to Income Ratio
49.4%
41%
44.4%
58%
39.5%
52.2%
Credit Deposit Ratio
84.5%
97.7%
73%
80.1%
80.4%
100%
ROA
1.6%
1.6%
1.5%
1%
1.5%
2%
ROE
19.2%
12.2%
18.4%
14.7%
23.8%
14.6%
CAR
17%
18.3%
13%
12.6%
17.5%
16.4%
* Q2FY13 Numbers
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Competitor Analysis
Business
Overview
GNPA %
5year
3year
2year
1year
HDFC Bank
1.37
1.16
1.03
1.02
ICICI Bank
3.75
4.06
3.85
3.58
Axis Bank
1.05
1.13
1.07
1.04
Yes Bank
0.30
0.24
0.22
0.22
Kotak Bank
2.17
1.70
1.49
1.29
SBI
3.03
3.36
3.64
4.18
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
34%
Appendix
Competitor Analysis
Growth in CASA
Deposits %
Growth in
Business %
CASA Ratio %
HDFC Bank
18.4
19.96
48.4
ICICI Bank
9.2
11.44
43.5
Axis Bank
16.3
17.54
42
Yes Bank
71.5
8.52
16.3
Kotak Bank
41
30.7
32.2
SBI
14.1
13.99
46.6
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Competitor Analysis - Ratios
Comparison of Ratios
Burden efficiency ratio
Cash cover-age ratio
GNPA
GNPA to Gross advance
HDFC Bank
0.76%
5.54%
2003
1.02%
ICICI Bank
0.15%
4.68%
10,607
3.58%
AXIS Bank
0.16%
4.21%
1,806
1.04%
YES Bank
0.09%
3.68%
83
0.22%
Kotak Bank
1.31%
3.09%
699
1.29%
SBI
0.66%
5.04%
49,648
4.18%
NNPA
354.19
2,692
472.64
17.46
273.43
21,095
NNPA to Net advance
Total business growth
ratio
Priority sector ratio
0.18%
0.92%
0.28%
0.05%
0.51%
1.81%
1.20
1.11
1.18
1.09
1.31
1.14
32.68%
20.29%
28.56%
25.92%
23.19%
29.71%
Aggregate deposits
2,46,706
2,81,950
2,19,987
49,151
36,460
14,14,689
Average working funds
3,07,631
5,68,979
263991
66334
83015
1738927
Working funds
3,37,909
6,04,191
2,85,416
73,662
92,349
18,29,956
Net profits
5,167
7,937
4,218
977
1,850
15,973
Operating profits
8,950
12,092
7,413
1,540
2,755
40,857
Total debt
2,70,552
4,43,247
2,54,059
63,308
65,655
15,72,680
Net worth
29,924
61,276
22,681
4,676
12,935
1,06,230
Total debt to net worth
9.04
7.23
11.20
13.54
5.08
14.80
53,143
11,63,670
Gross advances
1,95,420
2,92,125
1,69,759
37,988
Investments
97,482
2,39,864
92,921
27,757
Leverage
8.6%
7.8%
Business
Overview
Investment
Rationale
Financial
Analysis
10.6%
Valuation
10.1%
Risk Analysis
31,658
4,60,949
6%
10.4%
Summary
Appendix
Competitor Analysis – Ratios
Comparison of Ratios
HDFC Bank
ICICI Bank
AXIS Bank
YES Bank
Kotak Bank
SBI
Interest income
27,286
37,994
21,994
6,307
8,470
1,47,197
Interest income to AWF
8.87%
6.68%
8.33%
9.51%
10.20%
8.46%
Non-interest income
5,243
28,663
5,487
857
4,543
29,835
Non-interest income to AWF
1.80%
5.04%
2.08%
1.29%
5.47%
1.72%
Operating expenses
Interest spread
8,590
8.42%
29,552
7.46%
6,099
7.46%
932
9.19%
5,716
10.22%
46,856
6.88%
Net spread
8,950
12092
7,413
1,540
2,755
40,857
Risk weighted assets
2,41,896
4,41,488
2,31,711
51,982
74,279
11,12,982
Net profit to AWF
Net profit to net worth
Operating profits to NW
Capital adequacy ratio
Tier I
Tier II
1.68%
17.27%
29.91%
16.52%
11.60%
4.92%
1.40%
12.95%
19.74%
19.60%
12.80%
6.80%
1.60%
18.60%
32.68%
13.66%
9.45%
4.21%
1.47%
20.89%
32.93%
17.90%
9.90%
8.00%
2.23%
14.31%
21.30%
17.92%
16.54%
1.38%
0.92%
15.04%
38.46%
13.68%
9.65%
4.03%
Business
4,42,126
574075
389747
87,140
89,604
25,78,359
Equity multiplier
11.29
9.86
12.58
15.75
7.14
17.23
NIM
4.1%
2.26%
2.90%
2.33%
4.45%
3.30%
12,981
8,025
1,615
3,928
57,877
0.09
0.14
0.2
0.09
0.05
Net Interest Income
Profits per employee
Business
Overview
Investment
Rationale
12,296
0.08
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Company Analysis – Porters 5 Forces Model
Bargaining power
of suppliers
2
Threat of
Substitutes
4
Industry
rivalry
3
Bargaining power
of customers
3
Threat of
new entrants
2
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Competitor Analysis – Porters 5 Forces Model
The five forces
Score
Bargaining power of suppliers
2
Rationale
The Brand name HDFC coupled with the fact that it's one
of the industry leaders, leads to a low bargaining power of
suppliers
4
HDFC faces tough competition from the other top banks.
For almost every HDFC product, there is a substitute in
ICICI and to a great extent in Axis as well
Bargaining power of customers
3
HDFC is a leading bank providing world class facilities
which acts as a benchmark. However, other banks are
adept at innovating to attract customers.
Threat of new entrant
2
There are high regulatory barriers to entry
Industry rivalry
3
The industry sees a tough competition from its peers
which are equally well placed.
Threat of substitutes
Source : Team Estimates
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
SWOT Analysis
STRENGTH
1. Well qualified Top management. Able to deliver PAT growth
of 30% for past 36 quarters continuously.
2. Continuity of top management
WEAKNESS
1. Decline in Current Account Saving account on account of
increased presence in rural and semi urban areas
2.Profit per employee is low
3. Strength and support of parent.
3.Good and desirable composition of board.
4.Loyalty of employees & ability to retain trained manpower.
3.Wages per employee is lower than competitors. Might
cause increase in attrition rates
SWOT
THREATS
OPPORTUNITIES
1. Competitors eyeing the retail portfolio which is inherent
strength of the bank.
2.Increased competition from new private sector banks which
offer attractive interest rates .
3. "Excellent Past performance in your future enemy" moderation in growth numbers which might hamper the
banks image.
Business
Overview
Investment
Rationale
Financial
Analysis
1.Favourable market perception aiding ability to access capital
markets
2. Large deposit base( in absolute numbers) especially low
cost deposit offering opportunities for business expansion.
Valuation
Risk Analysis
Summary
Appendix
Top Management
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Corporate Governance (Committees)
• Audit and Compliance Committee
Chairman: Mr. C. M. Vasudev
Members: Mr. C. M. Vasudev, Mr. Ashim Samanta, Dr. Pandit Palande, Mr. Bobby
Parikh and Mr. Partho Datta
• Compensation Committee
Chairman: Mr. C. M. Vasudev
Members: Mr. C. M. Vasudev, Dr. Pandit Palande, Mr. Partho Datta and Mr. Bobby
Parikh
• Investor Grievance Committee
Chairman: Mr. Ashim Samanta
Members: Mr. Ashim Samanta, Mr. A. N. Roy, Mr. Aditya Puri and Mr. Paresh
Sukthankar.
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Corporate Governance (Committees)
• Risk Policy and Monitoring Committee
Members: Mr. C. M. Vasudev, Mrs. Renu Karnad, Mr. Partho Datta, Mr. Aditya Puri and
Mr. Paresh Sukthankar.
• Nomination Committee
Members: Mr. C. M. Vasudev, Mr. Ashim Samanta and Dr. Pandit Palande
• Fraud Monitoring Committee
Members: Mr. C. M. Vasudev, Dr. Pandit Palande, Mr. Partho Datta, Mr. A. N. Roy, Mr.
Aditya Puri and Mr. Keki Mistry
• Customer Service Committee
Members: Mr. C. M. Vasudev, Dr. Pandit Palande, Mr. A. N. Roy, Mr. Aditya Puri and Mr.
Keki Mistry
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
CSR Grading
Parameters considered for CSR ranking
Governance
Community
Board
Product
Leadership ethics
Transparency and
Reporting
Employees
Compensation and
benefits
Diversity and Labour
Rights
Training, health and
safety
Human Rights and
Supply Chain
Community
Development
Environment
Policy and Reporting
Resource Management
Overall
Community
Employees
Environment
Governance
HDFC Bank Ltd.
46
47
52
37
48
ICICI Bank Ltd
41
48
42
34
40
Axis Bank Limited.
47
49
57
35
50
49
51
50
45
50
41
47
48
36
35
Kotak Mahindra
Bank
State Bank of India
Group
Source: CSR hub, Team estimates
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Awards won by HDFC Bank
DSCI Information Technology Award 2012
- Security in Bank (2nd time in a row)
- Security Leader of the Year (Banking)
Businessworld Awards for Banking Excellence 2012
- Most tech-friendly Bank
- Deal of the year (Rupee Bonds)
HT-Mars Customer satisfaction survey
- Winner: Bank and Credit Card customer satisfaction Survey
CSO Forum Information Technology Award 2012
- Best Organisation for Information Security Practice (2nd time in a row)
Economic Times
ET Awards for Corporate Excellence - Company of the Year 2012
CNBC TV18's India Best Banks and Financial Institutions Awards 2012
Best Private sector Bank
Mint-Aon Hewitt study on India's Best Managed Boards 2012
Our Bank among India's six best managed Boards 2012
Forbes Asia
Fab 50 Companies - Winning for the 6th year
IBA Banking Technology Awards 2011
- Best Online Bank
- Best use of Business Intelligence
- Best Customer Relationship Initiative
- Best Risk Management & Security Initiative
- Best use of Mobility Technology in Banking
Dun & Bradstreet Banking Awards 2012
- Overall Best Bank
- Best Private Sector Bank
- Asset Quality - Private Sector
- Retail Banking -Private Sector
Finance Asia
- Best Managed Company
- Best CEO - Mr. Aditya Puri
Asian Banker International Excellence in Retail Financial Services
Awards 2012
- Best Retail Bank in India
- Best Bancassurance
- Best Risk Management
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Inorganic Growth: Past & Future
•
Acquisition Strategy:
Past Acquisitions
1.
2.
3.
4.
– Times Bank (2000)
• 1:5.75 Swap ratio
– Centurion Bank of Punjab (2008)
• 1:29 Swap ratio
• Short term EPS Dilutive (10%)
•
Suitable Targets:
Potential Acquisitions
•
– Target bucket-list:
• Catholic Syrian Bank
• Dhanlaxmi bank
• Karur Vysya Bank
• Karnataka Bank
• City Union Bank
• Lakshmi Vila Bank
• Federal Bank
• Jammu and Kashmir Bank
• South Indian Bank
Business
Overview
Investment
Rationale
Financial
Analysis
Asset based growth
Customer growth
Skilled man power
Geographical presence
•
Valuation
Karnataka Bank
•
500 Branches; South India
centric
•
Established Customer Base
Dhanlaxmi Bank:
•
Negative net profit of -115.63
crore; Better swap ratio can be
negotiated, a la CBOP
•
181 Branches
•
Short term pressure
Risk Analysis
Summary
Appendix
HDFC Bank – Reverse Merger with parent HDFC
Synergy :
Mortgage financing business of HDFC will improve due to lowering of funding cost ,
leveraging on HDFC banks strong deposit franchise
Net worth of combined entity (Rs 489 bn) would increase the risk taking ability of the
bank.
Economies of Scope : Large product suite will increase the cross selling potential.
Optimal usage of infrastructure and IT resources.
Hurdles :
The merged entity will now have to meet the RBI’s reserve requirement of
SLR-23%, CRR-4%.
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Comparison – South East Asia
In million $
Schemes
HDFC Bank
CIMB
Public Bank
Asset Base
61,438
96,064
80,598
Number of Branches
2,544
1105
362
NIM
4.1%
5.87%
3%
ROE
18%
20.88%
26.9%
GNPA
1.02%
2.29%
0.8%
PBV
5.3
1.92
3.12
Product profile
Mortgage Banking ,Auto
Loans,Business Banking
Mortgage ,Credit Card
, micro lending
Bankassurance
Hire purchase,
Retail & corporate
lending , treasury
Countrywise exposure
India
Malaysia, Indonesia,
Singapore and
Thailand
Malaysia,Hongkong
, Cambodia
Stock Price
$13.4
$2.24
$5.16
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Reasons for Moderating PAT Growth
1. Increased Base Effect
2. Increased Competition From
Private And Public Sector Banks
3. Uncertain Macro
4. Moderation in CASA growth
5. Expected increase in delinquency
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Increased Base Effect
Total Asset
in cr
Growth in Total Assets
37.61%
400000
350000
300000
250000
200000
150000
100000
50000
0
CAGR~ 30%
21.38%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
PAT
in cr
FY 09
FY 10
24.68%
FY 11
21.83%
FY 12
Operating Profit - pre provision
38%
6000
5000
24%
4000
CAGR~ 30%
3000
20%
16%
2000
1000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
2008-09
2009-10
Risk Analysis
2010-11
Summary
2011-12
Appendix
Increased Competition
Other focus sectors like infra
have nearly dried out
Credit Growth is already subdued
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Macroeconomic
Uncertainty
Weak
Macro
GDP growth is predicted to be in the range of 4.9-5.3% (IMF report) and Credit
growth is seen to be 2.5x of GDP growth historically
Credit Growth
GDP Growth
30.0%
12.0%
10.0%
9.6%
25.0%
9.3%
8.4%
8.0%
21.0%
6.9%
20.0%
15.0%
4.0%
10.0%
2.0%
5.0%
0.0%
0.0%
Business
Overview
2008-09
Investment
Rationale
21.0%
17.3%
16.8%
16.0%
6.0%
2007-08
23.3%
8.4%
6.7%
2006-07
24.0%
2009-10
2010-11
Financial
Analysis
2011-12
Valuation
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13E
Risk Analysis
Summary
Appendix
ModeratingCASA
CASA
Moderating
Moderating CASA on account of branch expansion in rural and semi urban areas
and due to increased interest rates by new private sector banks
Branch Distribution
CASA Ratio
40%
36%
35%
36%
49
34%
30%
48.4
48.5
28%
27%
25%
48
47.7
47.5
22%
47
46.5
20%
46
45.9
46
15%
45.4
45.5
10%
8%
9%
45
44.5
5%
44
0%
43.5
Urban
Semi Urban
Mar-09
Business
Overview
Investment
Rationale
Rural
Metro
3QFY12
4QFY12
1QFY13
2QFY13
3QFY13
Mar-12
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Increaseinindeliquency
delinquency
Increase
Deterioration in asset quality due to adverse macro economic conditions.
Asset Quality
GNPA(%)
NNPA(%)
1.95%
1.41%
1.05%
1.02%
1.05%
0.19%
0.18%
0.21%
1.14%
1.19%
0.24%
0.25%
0.63%
0.31%
FY09
Business
Overview
FY10
Investment
Rationale
FY11
Financial
Analysis
FY12
Valuation
FY13(E)
FY14(E)
Risk Analysis
FY15(E)
Summary
Appendix
Latest Results
Increase in GNPA surprises negatively GNPA ratio increased 9bps sequentially to 1.0%, while NNPA ratio remained flat at 0.2%
High other income has led to 30% YoY PAT growthRobust other income has led to earnings growth despite moderate performance in core income (NII)
Advances growth driven by retail segment:
Advances grew at a robust pace of 24% YoY
CASA continues to decline:
Bank's average CASA ratio at 45.4% (about 230bps lower YoY)
Margins:
NIM`s for the quarter declined by 10bps to 4.1%
Branch additions:
Around 6% of the bank’s 2,776 branches were added in 3QFY13
Source: Financial Results, Team Estimates
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
HDFC Bank – Loan Book
Wholesale loans
Car loan
CV
2w
2w
CV
Wholesale loans
Personal
loan Business
Banking
Retail Loans
Personal loan
Loan against Security
Business Banking
CC
Car loan
Home
Loan
Loan against Security
CC
other Gold Loan
Home Loan
Gold Loan
other
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Trends – Loan Book
Growth in Deposits & Advances
Deposit
Advances
Loan Book Mix
Credit Deposit Ratio
450,000
82%
400,000
80%
350,000
78%
300,000
76%
250,000
74%
200,000
72%
150,000
70%
100,000
68%
50,000
66%
0
64%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
58.18%
61.01%
56.79%
49.65%
54.41%
FY08
FY09
FY10
FY11
FY12
Wholesale Loan Book
Source: Annual Report, Team estimates
Business
Overview
Investment
Rationale
Financial
Analysis
Retail Loan Book
Source: Annual Report
Valuation
Risk Analysis
Summary
Appendix
Stock Option
0
Schemes
Options in force
Range of Excercise
Price
Weighted Avg
Life
A -2000
-
73.26
-
B- 2003
1,950,300
71.72 to 219.74
1.16
C - 2005
3,421,500
126.12 to 219.74
0.93
D- 2007
26,489,250
219.74 to 340.96
2.12
E- 2010
66,270,250
440.16 to 508.23
1.84
eCBOP Key ESOP
33,595
23.20
1.04
eCBOP – General ESOP
1,707,845
88.45 to 251.72
1.88
Grant Date/Commencement Date
Business
Overview
5
(2-5 years)
Investment
Rationale
Financial
Analysis
EXERCISE PERIOD(2-4 years)
9
Vesting Date
Valuation
Risk Analysis
Expiration Date
Summary
Appendix
Financial Statement : Income Statement
Year
INCOME :
Interest Earned
Interest on advances
AVG YIELD ON ADV
Income on investments
AVG YIELD ON INV
Inv with RBI
Other Income
II. Expenditure
Interest expended
COST OF FUNDS
Interest on Deposits
FY 07
66,479
43,342
FY 08
FY 09
FY 10
FY 11
FY 12
Rs in Millions
FY 13 (E)
FY 14 (E)
FY 15 (E)
101,150
69,667
12.62%
28,720
7.18%
2,724
22,832
163,323
121,367
14.96%
40,080
7.41%
1,843
32,906
161,729
120,983
10.77%
39,813
6.78%
810
38,076
199,281
150,850
10.56%
46,754
7.22%
1,481
43,352
272,863
205,366
11.56%
65,045
7.72%
1,371
52,437
325,504
241,311
11.20%
82,321
7.41%
1,371
65,509
384,428
280,559
10.87%
101,997
7.30%
1,371
77,302
461,996
333,684
10.86%
126,441
7.31%
1,371
90,106
26,953
48,871
4.64%
43,827
89,111
5.86%
80,155
77,863
4.32%
69,977
93,851
4.21%
80,283
149,896
5.54%
126,897
181,321
5.53%
153,705
208,831
5.34%
175,677
248,693
5.33%
208,869
Int on Inter-bank Borr
2,741
2,424
8,848
7,455
13,364
22,529
27,034
32,441
38,929
Other interest
Net Interest Income
NIM
Net Income
Operating expenses
PPOP
% growth
Provisions
% growth
Pre Tax Profit
Provision for Tax
PAT
% growth
Net profit margin
2,101
34,685
2,620
52,279
4.10%
75,110
37,456
37,654
46.86%
14,848
60.5%
22,807
6,905
15,902
39.31%
12.83%
109
74,212
4.24%
107,118
55,328
51,790
37.54%
18,797
26.6%
32,992
10,543
22,449
41.17%
11.44%
431
83,866
3.91%
121,942
57,644
64,298
24.15%
21,406
13.9%
42,892
13,404
29,487
31.35%
14.76%
203
105,430
4.05%
148,782
71,530
77,252
20.15%
19,067
-10.9%
58,185
18,923
39,263
33.15%
16.18%
470
122,967
4.20%
175,404
85,901
89,503
15.86%
14,373
-24.6%
75,130
23,461
51,670
31.60%
15.88%
581
144,183
4.05%
209,692
103,454
106,238
20.43%
14,692
2.2%
91,546
27,464
64,082
24.02%
16.39%
713
175,596
4.10%
252,898
124,795
128,104
20.63%
16,181
10.1%
111,922
33,577
78,346
22.26%
16.97%
895
213,303
3.96%
303,408
150,615
152,794
20.69%
17,934
10.8%
134,860
40,458
94,402
22.49%
17.10%
20,575
2,529
15,162
31,795
49,847
24,208
25,640
9,252
16,388
4,973
11,415
Financial Statement : Balance Sheet
Year FY07
FY08
FY09
TOTAL LIABILITIES & SHAREHOLDERS EQUITY
Capital
3194
3544
4254
FY10
FY11
FY12
FY13
Rs in Millions
FY14
FY15
4577
4652
4693
4693
4693
4693
share warrant
4009.16
Reserves & surplus 61138 111428
ESOP
Equity
64332 114972
Deposits
682979 1007686
142209
54.9
150527
1428116
210618
29.1
215225
1674044
249111
29.1
253793
2085864
294550
3.0
299247
2467064
345816
0
350509
2979523
408493
0
413186
3537922
484014
0
488707
4202523
Borrowings
28154
44789
91636
129157
143941
238465
301603
369536
462996
Other Liabilities
136891 164319
162428
206159
289929
374319
437952
503056
580049
TOTAL LIAB
912356 1331766
1832708
2224586
2773526
3379095
4069588
4823701
5734276
Cash with RBI
50753
125532
135272
154833
251008
149911
143255
114224
118789
Balances -Banks
39714
22252
39794
144591
45680
59466
81121
111979
113146
Investments
305648 493935
588175
586076
709294
974829
1247301
1545417
1915769
Advances
469448 634269
988830
1258306
1599827
1954200
2354254
2805592
3336843
ASSETS:
Fixed Assets
9667
11751
17067
21228
21706
23472
26439
29274
32512
Other Assets
37127
44027
63568
59551
146011
217216
217216
217216
217216
TOTAL ASSETS
912356 1331766
1832708
2224586
2773526
3379095
4069588
4823701
5734276
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Financial Ratios
NIM
YOY Growth
Deposits
Loans
Net interest Income
Fee Based income
Operating Revenue
Operating Expense
Pre provisioning
operating Profit
Pre Tax Profit
PAT
EPS
DPS
ROA
Tier I leverage ratio
ROE
Asset Quality
GNPA (%)
NNPA (%)
Slippage Ratio (%)
NPA reduction rate (%)
Write off rate (%)
Up gradations (%)
Business
Overview
Investment
Rationale
2012
4.20%
2013(E)
4.05%
2014(E)
4.10%
2015(E)
4.1%
18.28%
22.15%
16.63%
18.87%
31.04%
17.89%
20.77%
20.47%
17.25%
17.00%
60.02%
19.55%
20.50%
20.90%
21.79%
17.00%
21.25%
20.60%
21.05%
21.56%
21.47%
15.00%
21.45%
19.97%
20.09%
20.43%
20.63%
20.69%
15.86%
31.60%
22.11
4.30
1.73%
11.29%
18.69%
18.70%
24.02%
27.18
5.44
1.7%
11.61%
18.28%
20.58%
22.26%
33.24
6.65
1.69%
11.67%
18.96%
21.27%
22.49%
40.05
8.01
1.68%
11.73%
19.32%
1.02%
0.18%
0.81%
38.84%
28.79%
0.10%
1.05%
0.21%
0.91%
39.67%
30.00%
0.10%
1.14%
0.24%
1.00%
39.28%
30.00%
0.10%
1.19%
0.25%
1.00%
39.09%
30.00%
0.10%
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Financial Ratios
Capital Adequacy Ratio
2012
2013(E)
2014(E)
2015(E)
CAR (%)
16.52%
15.48%
15.42%
15.36%
Tier 1 (%)
11.60%
11.48%
11.42%
11.36%
Tier 2 (%)
4.92%
4.00%
4.00%
4.00%
Risk weighted assets / Total Assets (%)
76.34%
75.00%
75.00%
75.00%
Net NPA
0.18%
0.21%
0.24%
0.25%
Provision Coverage Ratio
82.38%
80.48%
79.51%
78.76%
48.40%
45.84%
45.33%
44.82%
0.85
0.86
0.86
0.86
41.28%
38.20%
39.07%
38.82%
NII/Working Funds
3.64%
3.54%
3.64%
3.72%
Non Interest Income / Working Funds
1.55%
1.61%
1.60%
1.57%
Business per employee (in millions)
669
719
772
850
Profit per employee (in millions)
0.78
0.87
0.96
1.07
Solvency Ratios
Liquidity Ratios
CASA Ratio
Funding volatility Ratio
liquid Asset to Total Asset
Profitability Ratios
Productivity
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Corporate Exposure of HDFC Bank
Bank's exposure to sensitive sectors (as of March 31, 2012)
As a percentage of total exposure
HDFC Bank
ICICI Bank
Power
Roads
Telecom
Commercial
real Estate
Capital
Market
Textile
Iron and
Steel
Total
2.2%
6.1%
0.95%
1.18%
3.14%
0.91%
1.9%
16.38%
5.4%
Axis Bank
3.3%
Yes Bank
3.0%
Kotak Bank
3.6%
5.7%
2.0%
4.7%
NA
NA
1.2%
1.4%
NA
5.5%
4.7%
0.7%
4.1%
26.2%
4.7%
2.0%
1.8%
2.3%
17.3%
3.7%
1.1%
0.4%
1.6%
15.9%
9.6%
2.0%
NA
0.2%
15.3%
Source :Annual Reports, Team Estimates
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation : Beta Test
1.2
Beta Values
1
Monthly
Weekly
1y
1.056591
0.953765
2y
0.726818
0.9351
0.8
0.6
Monthly
0.4
Weekly
0.2
0
1y
3y
0.768971
2y
3y
0.86445
R2 Value
1
Monthly
Weekly
0.88972
0.88492
R2
0.8
0.6
1Y
2Y
3Y
Business
Overview
0.63762
0.26893
Investment
Rationale
0.66837
0.4
Weekly
0.2
0
0.26377
Financial
Analysis
Monthly
1Y
Valuation
2Y
Risk Analysis
3Y
Summary
Appendix
Valuation : Cost of Equity
Risk Free Rate
Equity Risk Premium
10 year Govt bond yield = 7.9%
Consideration:
1. High Liquidity
2. Time duration enough to cover
fluctuations in interest rate cycle.
3. Duration matching with valuation.
Historical Premium =Returns from Stock Market
–Bond Yield
= 15% -7.9% = 7.1%
Adjusted Beta
Cost of Equity -> CAPM
Beta = 0.67(Historical Beta)+0.33*1
=0.67*(0.95)+0.33
=0.97
Cost of Equity = Rfr + Beta *(ERP)
= 7.9%+0.97*7%
= 14.7%
Business
Overview
Investment
Rationale
Financial
Analysis
Implied Premium = Risk Premium of US Market +
Sovereign Default Spread
=5%+2% =7%
Valuation
Risk Analysis
Summary
Appendix
Valuation : Residual Income Model
Cost of Equity
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
51,670
64,082
78,346
94,402
50648
59324
69932
82714
97490
114571
134316
157142
183529
214033
249294
1,022
4,758
8,414
11,688
11,639
11,582
11,516
11,440
11,352
11,250
11,132
14.55%
Net Income
- Equity Cost (see
below)
Excess Equity
Return
109,128 126,152 145,832 168,582 194,881 225,282 260,426
13659
Terminal Value
Beginning BV of
Equity
299,247 350,509 413,186 488,707 576,010 676,932 793,598 928,463 1,084,368 1,264,594 1,472,935
Cost of Equity [%]
Equity Cost on
Book Value
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
16.9%
50647.5 59323.7 69931.7 82713.7 97489.7 114570.7 134316.4 157142.4 183529.3 214032.5 249294.2
Intrinsic value of HDFC Bank
Value per share as on March 2013
Intrinsic value of HDFC securities
Intrinsic value of HDB per share
Expected value per share
Business
Overview
FY
2022
Investment
Rationale
403,149.4
रु 599
रु 3
रु 2
रु 604
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Derivation of P/BV - Gordon Growth Model
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation of Subsidiaries: HDFC Securities
Discounted Cash Flow
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Operating Profit
231.0
254.1
279.5
307.5
335.1
362.0
387.3
410.5
431.1
448.3
Taxes
78.3
86.1
94.8
104.2
113.6
122.7
131.3
139.2
146.1
152.0
NOPAT
152.7
168.0
184.8
203.2
221.5
239.3
256.0
271.4
284.9
296.3
Free Cash Flow
152.7
168.0
184.8
203.2
221.5
239.3
256.0
271.4
284.9
296.3
Terminal Value
1907.6
Total Flows
152.7
168.0
184.8
203.2
221.5
239.3
256.0
271.4
284.9
2203.9
PV
128.3
118.6
109.6
101.4
92.8
84.3
75.8
67.5
59.5
387.0
Enterprise Value as on 31 March 2011
1224.8
Less: Current Debt
Equity Value as on 31 March
0
1224.81
Equity Value on 30 September 2012
1122.78
HDFC Bank's holding
Value of HDFC holding
Intrinsic value per share
63.02%
707.6
3.00
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation of Subsidiaries: HDB Financials
Components of Two Stage Model
High growth period
Payout
Growth in EPS
25
0.00%
20.00%
Stable Firm
Growth till perpetuity
Payout ratio
3%
82%
ROE
cost of equity
17%
21.65%
Final P/BV
0.5
Book value on FY13
No of Shares trading in HDFC bank
HDFC Bank stake in HDB
Bv per share
915
236
97.03%
4.00
Price based on Gordon growth model
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
INR 2.13
Risk Analysis
Summary
Appendix
PBV v/s Asset Growth
Banks
Growth in Asset P/BV
HDFC Bank
ICICI Bank
AXIS Bank
SBI Bank
Kotak Bank
Indusand Bank
Wells fargo
PHILTRUST BANK
Commonwealth bank of aus
Royal bank of canada
Westpac banking corp
GRAUBUNDNER K-PC
Aust and nZ bank
Itau unibanco
Toronto dominion bk
Bank of nova scotia
Banco bradesco
US bancorp
Nordea bank
DBS
UMWELTBANK AG
PUBLIC BANK BHD
HANG SENG BK
BANK OZARKS
Business
Overview
Investment
Rationale
30.12%
8.90%
31.22%
17.53%
26.36%
22.42%
19.83%
8.50%
10.28%
6.56%
12.30%
6.16%
10.32%
28.00%
13.94%
10.16%
20.81%
8.28%
11.72%
8.66%
13.16%
10.11%
3.33%
17.30%
Financial
Analysis
5.05
2.13
2.64
1.44
3.88
4.19
1.27
4.32
2.5
2.3
1.95
3.80
1.9
2.06
1.74
1.98
1.94
1.84
1.2
1.16
3.46
3.13
2.86
2.78
Valuation
Regression Equation
Y=3.298x+2.073
P/BV HDFC BANK = 3.066
Risk Analysis
Summary
Appendix
PBV v/s ROA
Banks
HDFC Bank
ICICI Bank
AXIS Bank
SBI Bank
Kotak Bank
Indusand Bank
Wells fargo
PHILTRUST BANK
Commonwealth bank of aus
Royal bank of canada
Westpac banking corp
GRAUBUNDNER K-PC
Aust and nZ bank
Itau unibanco
Toronto dominion bk
Bank of nova scotia
Banco bradesco
US bancorp
Nordea bank
DBS
UMWELTBANK AG
PUBLIC BANK BHD
HANG SENG BK
BANK OZARKS
Business
Overview
Investment
Rationale
ROA
P/BV
1.70%
5.05
2.13
2.64
1.44
3.88
4.19
1.27
4.32
2.5
2.3
1.95
3.80
1.9
2.06
1.74
1.98
1.94
1.84
1.2
1.16
3.46
3.13
2.86
2.78
1.34%
1.60%
0.88%
2.21%
1.56%
1.38%
1.96%
1.02%
0.92%
0.89%
0.45%
0.91%
1.44%
0.82%
0.99%
1.39%
1.63%
0.45%
1.10%
0.55%
1.41%
0.92%
2.60%
Financial
Analysis
Valuation
Regression Equation
Y=74.5x+1.628
P/BV HDFC BANK = 2.98
Risk Analysis
Summary
Appendix
PBV v/s Growth in EPS
Banks
Growth in EPS
P/BV
HDFC
25.11%
5.05
ICICI
AXIS
SBI
Kotak
wells fargo
16.47%
34.39%
13.36%
24.45%
7.12%
23.57%
5.42%
3.27%
0.93%
3.60%
-0.97%
3.20%
4.25%
5.61%
6.53%
2.98%
-4.00%
4.06%
10%
11%
14.05%
2.13
2.64
1.44
3.88
1.27
4.32
2.5
2.3
1.95
3.80
1.9
2.06
1.74
1.98
1.94
1.84
1.2
1.16
3.46
3.13
2.86
PHILTRUST BANK
Commonwealth bank of aus
Royal bank of canada
Westpac banking corp
GRAUBUNDNER K-PC
Aust and nZ bank
Itau unibanco
Toronto dominion bk
Bank of nova scotia
Banco bradesco
US bancorp
Nordea bank
DBS
UMWELTBANK AG
PUBLIC BANK BHD
HANG SENG BK
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Regression Equation
Y=6.671x+1.829
P/BV HDFC BANK = 3.51
Risk Analysis
Summary
Appendix
PE v/s % Growth in EPS
Banks
Growth in EPS
P/E
GRAUBUNDNER K-PC
3.60%
20.99
UMWELTBANK AG
10%
18.79
PUBLIC BANK BHD
11%
14.50
HANG SENG BK
14.05%
13.45
HDFC
25.11%
28.95
ICICI
16.47%
17.04
AXIS
34.39%
14.17
SBI
13.36%
9.46
wells fargo
7.12%
10.29
Commonwealth bank of aus
5.42%
14.44
royal bank of canada
3.27%
12.97
westpac banking corp
0.93%
14.34
Aust and nZ bank
-0.97%
13.18
Itau unibanco
3.20%
11.61
Toronto dominion bk
4.25%
11.32
Bank of nova scotia
5.61%
12.52
Banco bradesco
6.53%
11.95
US bancorp
2.98%
11.72
Nordea bank
-4.00%
10.89
DBS
4.06%
9.51
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Regression Equation
Y=42.17x + 11.78
PE HDFC BANK = 17.41
Risk Analysis
Summary
Appendix
Valuation :Estimates
1. Number of Branches and ATMS
Number of
Employees
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13(E)
FY 14(E)
FY 15(E)
21,477
37,836
52,687
51,888
55,752
66,076
73,876
81,676
88,176
16,359
14,851
-799
3,864
10,324
7,800
7,800
6,500
49.7
37.3
30.1
28.1
26.0
26
26
26
761
1,412
1,725
1,986
2,544
2,844
3,144
3,394
77
651
313
261
558
300
300
250
11.26%
85.55%
22.17%
15.13%
28.10%
11.79%
10.55%
7.95%
1,977
3,295
4,232
5,471
8,913
12,413
16,413
20,413
372
1,318
937
1,239
3,442
3500
4000
4000
Addition
Branch Wise
Branches
684
Branch Addition
ATM
1,605
ATM Addition
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
2. Demand Deposits
Demand depo
From Banks
From Others
198,118
284,449
372,271.
464,604
454,078
507,473
582,225
668,191
7,592.2
10,554.6
10,184.8
9,122.0
9,122.0
9,122.0
9,122.0
276,857.0
361,716.4
454,420.1
444,956.4
498,351.2
573,103.8
659,069.4
45.2%
-1.1%
30.9%
24.8%
-2.3%
12%
15%
15%
261,539
349,147
498,768
634,478
739,980
858,377
1,021,469
1,215,548
33.5%
33.5%
42.9%
27.2%
16.6%
16%
19%
19%
633,596.6
871,038.8
1,099,082.8
1,194,058.8
1,365,850
39.4%
15.4%
37.5%
26.2%
8.6%
14.4%
17.4%
17.5%
54.5%
44.4%
52.0%
52.7%
48.4%
45.8%
45.3%
44.8%
794,519.2
803,005.6
986,781.3
1,273,005.7
1,613,672
1,934,227
2,318,784
58.7%
73.3%
1.1%
22.9%
29.0%
26.8%
19.9%
19.9%
15,195.9
16,305.3
13,824.4
14,267.6
13,839.9
14,531.9
15,258.4
16,021.4
0.9%
7.3%
-15.2%
3.2%
-3.0%
5.0%
5.0%
5.0%
778,213.9
789,181.2
972,513.7
1,259,165.8
1,599,141
1,918,969
2,302,762
61.8%
75.5%
1.4%
23.2%
29.5%
27.0%
20.0%
20.0%
42.3%
45.5%
55.6%
48.0%
47.3%
51.6%
54.2%
54.7%
55.2%
682,979
1,007,686
1,428,116
1,674,044
2,085,864
2,467,064
2,979,523
3,537,922
4,202,523
47.5%
41.7%
17.2%
24.6%
18.3%
20.77%
20.50%
21.05%
6,953.5
195,848
Growth %
CASA Depo
393,966.6 549,136.4
Growth %
Proportion%
Term Depo
57.7%
289,012.8 458,549.6
Growth %
From Banks
15,052.9
Growth %
From Others
273,959.9 443,353.7
Growth %
Proportion%
TOTAL
DEPOSIT
Growth
8,447.1
191,164.9 279,149.9
Growth %
Savings Depo
287,597
1,603,694.8
1,883,739.5
Valuation :Estimates
3. Borrowings
RBI
Other Banks
Other Insti
FY 07
FY 08
FY 09
FY 10
-
-
-
-
9,256.3
Subordinated
debts
FY 12
FY 13(E)
FY 14(E)
FY 15(E)
1,200.0
400.0
440.0
484.0
532.4
-66.67%
10.0%
10.0%
10.0%
8,867.8
10,439.2
19,080.3
7,050.6
8,693.3
10,431.9
12,518.3
15,021.9
-4.20%
17.72%
82.78%
-63.05%
23.30%
20.0%
20.0%
20.0%
2.2
56,450.8
75,263.0
9,270.4
28,182.4
32,409.8
37,271.3
42,861.9
-99.9%
2565844.7%
33.3%
-87.7%
204.0%
15.0%
15.0%
15.0%
0
0
69,471
105,969
105,969
105,969
105,969
1,556.6
Growth %
FY 11
-
-
52.54%
Outside India
Total
Borrowings
Business
Overview
17,341.0
28,153.9
35,918.6
24,746.4
34,813.6
56,948.7
95,220.4
107.1%
-31.1%
40.7%
63.6%
44,788.6
91,636.4
129,156.9
143,940.6
Investment
Rationale
Financial
Analysis
Valuation
152,352.6
213,293.7
298,611.2
67.2%
60.0%
40.0%
40.0%
238,465.1
301,603.3
369,536.3
462,996.5
Risk Analysis
Summary
Appendix
Valuation :Estimates
4. Other Liabilities and Provisions
Bills Payable
Growth %
Interest
Accrued
% of Term
Deposit and
Borrowing
Others
(including
provisions)
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13(E)
FY 14(E)
FY 15(E)
36,781.4
31,572.1
29,224.1
59,257.4
56,361.5
54,657.3
57,390.2
60,259.7
63,272.7
-14.2%
-7.4%
102.8%
-4.9%
-3.0%
5.0%
5.0%
5.0%
17,038.1
16,747.5
33,238.7
19,968.3
27,936.9
52,070.8
52,814.6
53,625.4
54,499.2
2.4%
1.6%
2.2%
1.1%
1.3%
1.9%
1.4%
1.5%
1.6%
83,072
116,000
99,965
126,934
205,630
267,591
327,748
389,171
462,278
11.5%
7.0%
7.6%
9.9%
10.8%
11.0%
11.0%
11.0%
164,319.1
162,428.2
206,159.4
289,928.6
374,318.7
437,952.2
503,056.5
580,049.4
-1.2%
26.9%
40.6%
29.1%
17.0%
14.9%
15.3%
% of total assets
Total
136,891.3
Growth %
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
5.Investments
Government Sec
225,442
316,656
521,566
510,499
536,513
762,178
990,832
1,238,540
1,548,175
40.5%
64.7%
-2.1%
5.1%
42.1%
30.0%
25.0%
25.0%
Approved Sec
6.8
5.8
12.5
5.0
4.9
4.9
0.5
0.5
0.5
Shares
583
345
397
1,035
935
836
920
1,012
1,163
-40.90%
15.30%
160.56%
-9.69%
-10.57%
10.0%
10.0%
15.0%
62,517
19,428
11,393
5,348
9,628
14,443
18,053
22,567
-15.4%
-68.9%
-41.4%
-53.1%
80.0%
50.0%
25.0%
25.0%
216
1,238
1,551
1,551
7,451
7,548
7,548
7,548
7,548
5,500
113,172
45,218
61,121
158,158
194,627
233,552
280,263
336,315
1957.8%
-60.0%
35.2%
158.8%
23.1%
20.0%
20.0%
20.0%
493,933
588,173
585,604
708,409
974,823
1,247,295
1,545,417
61.6%
19.1%
-0.4%
21.0%
37.6%
28.0%
23.9%
24.0%
6
6
6
6
6
Debentures/Bonds
Subsidiaries/JV
Others
Net value of
investments
Growth %
OUTSIDE INDIA
73,899
305,646
Shares
-
-
-
-
Debentures/Bonds
2.2
2.2
2.2
472.1
878.3
-
-
-
Net value of Inv
Total value of
investments
2.2
2.2
2.2
472.1
884.3
6.0
6.0
6.0
588,175.5
586,076.2
709,293.7
305,648.0 493,935.4
1,915,769
6.0
974,829.1 1,247,301.4 1,545,422.6 1,915,775.2
Valuation :Estimates
6.Advances
(Rs in
millions)
7. Advances
TYPE
Bills
Purchased
16,374
48,553
63,615
97,112
122,124
Growth %
103.5%
196.5%
31.0%
52.7%
25.8%
Share %
2.6%
4.9%
5.1%
6.1%
6.2%
154,377
215,972
239,853
535,419
86,272
Growth %
49.2%
39.9%
11.1%
123.2%
28.2%
Share %
24.3%
21.8%
19.1%
33.5%
35.1%
463,518
724,305
954,839
967,296
1,145,804
Growth %
29.5%
56.3%
31.8%
1.3%
18.5%
Share %
73.1%
73.2%
75.9%
60.5%
58.6%
Cash Credits
Term Loans
Business
Overview
8,048
103,445
357,955
Investment
Rationale
Financial
Analysis
Valuation
145,964
173,947
206,884
19.5%
19.2%
18.9%
6.2%
6.2%
6.2%
828,697
87,568
1,174,569
20.8%
19.2%
18.9%
35.2%
35.2%
35.2%
1,644,077
1,955,390
20.4%
19.2%
18.9%
58.6%
58.6%
58.6%
1,379,593
Risk Analysis
Summary
Appendix
Valuation :Estimates
6.Advances
Secured by
Tangible Assets
328,454
426,629
734,678
892,328
1,174,929
1,420,598
1,711,543
Growth %
29.9%
72.2%
21.5%
31.7%
20.9%
20.5%
19.2%
18.9%
Share %
Covered by Bank/
govt guarantee
67.3%
74.3%
70.9%
73.4%
72.7%
72.7%
72.7%
72.7%
17,525
24,956
29,462
33,137
55,553
65,919
78,557
93,432
Growth %
235.5%
42.4%
18.1%
12.5%
67.6%
18.7%
19.2%
18.9%
Share %
2.8%
2.5%
2.3%
2.1%
2.8%
2.8%
2.8%
2.8%
190,115
229,196
336,516
391,760
478,050
576,792
687,370
817,526
Growth %
40.0%
20.6%
46.8%
16.4%
22.0%
20.7%
19.2%
18.9%
Share %
30.0%
23.2%
26.7%
24.5%
24.5%
24.5%
24.5%
24.5%
135,770
Unsecured
Business
Overview
5,224
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
2,039,665
Summary
2,425,885
Appendix
Valuation :Estimates
6.Advances
SECTOR ( Advances in India)
Priority Sector
Growth %
Share %
Public Sector
Growth %
Share %
Banks
Growth %
Share %
Others
Growth %
Share %
TA
176,831
2,052
383.2
290,182
469,448
174,263
297,816
441,576
547,812
638,630
782,322
938,786
1,117,155
-1.5%
37.1%
4,772
132.6%
0.8%
87.5
-77.2%
0.0%
455,147
56.8%
71.8%
70.9%
47.0%
30,831
546.1%
3.1%
3,666.7
4090.5%
0.4%
648,183
42.4%
65.6%
48.3%
45.0%
52,635
70.7%
4.2%
6,229.1
69.9%
0.5%
738,082
13.9%
58.7%
24.1%
44.2%
54,001
2.6%
3.4%
286.0
-95.4%
0.0%
951,192
28.9%
59.5%
16.6%
41.1%
70,539
30.6%
3.6%
3,714.2
1198.5%
0.2%
1,182,102
24.3%
60.5%
22.5%
20.0%
19.0%
41.3%
77,592
10.0%
40.9%
85,352
10.0%
40.7%
93,887
10.0%
3.3%
3,751
1.0%
3.0%
3,789
1.0%
2.8%
3,827
1.0%
0.2%
1,430,343
21.0%
0.1%
1,716,412
20.0%
0.1%
2,059,694
20.0%
60.8%
61.2%
61.7%
634,269
980,497
1,238,522
1,553,291
1,894,985
2,294,009
2,744,338 3,274,563
0.00
0.00
13810
18419
18592
18767
18943
0.86%
0.94%
0.94%
0.94%
0.94%
32726
40797
41654
42487
43337
2.0%
2.1%
2.1%
2.0%
2.0%
Advances outside India
Due - banks
Due-others
TA
0.00
0.00
469,448
Growth %
CD Ratio
68.7%
0.00
0.00
8334
19784
634,269
988,830
1,258,306
1,599,827
1,954,200
2,354,254
2,805,592
3,336,843
35.1%
55.9%
27.3%
27.1%
22.2%
20.47%
20.90%
21.56%
62.9%
69.2%
75.2%
76.7%
79.2%
79.0%
79.3%
79.4%
Valuation :Estimates
7. Cash Balance with RBI
7.. Cash and Balances with RBI
Cash in hand
(including foreign
6,393
9,401
currency)
15,862
24,353
29,980
43,070
47,085
28,056
33,368
% of Advances
1.5%
1.6%
1.9%
1.9%
2.2%
2.00%
1.00%
1.00%
Growth %
47.1%
68.7%
53.5%
23.1%
43.7%
9.3%
-40.4%
18.9%
Balances with RBI
In current account
43360
115131
118410
129480
220029
104841
94170
84168
83421
% of Advances
9.24%
18.15%
11.97%
10.29%
13.75%
5.36%
4.00%
3.00%
2.50%
In other account
1000
1000
1000
1000
1000
2000
2000
2000
2000
Total
50753
125532
135272
154833
251008
149911
143255
114224
118789
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
8. Interest Received
10. Interest Received
Interest On
Advances
% of Advances
(Rs in millions)
43,342
69,667
121,367
120,983
150,850
205,366
9.2%
11.0%
12.3%
9.6%
9.4%
10.5%
10.25%
10.00%
10.00%
60.7%
74.2%
-0.3%
24.7%
36.1%
17.5%
16.3%
18.9%
20,575
28,720
40,080
39,813
46,754
65,045
82,321.50
6.73%
5.81%
6.81%
6.80%
6.60%
6.67%
6.60%
6.60%
6.60%
39.6%
39.6%
-0.7%
17.4%
39.1%
26.6%
23.9%
24.0%
2,724
1,843
810
1,481
1,371
1,371
1,371
1,371
7.69%
-32.35%
-56.06%
82.91%
-7.41%
101,111.6
163,289.6
161,605.2
199,085.3
271,782.0
325,003.6
383,927.7
461,496.0
Growth %
Income on
investments
% of Net
Investments
Growth %
Interest on inv
with RBI and
Banks
Growth %
Total Interest
Received
Business
Overview
2,529
66,446.2
Investment
Rationale
Financial
Analysis
Valuation
241,311.1
Risk Analysis
280,559.2
101,997.49
Summary
333,684.3
126,440.77
Appendix
Valuation :Estimates
9. Other Income
11. Other Income
Commission
Exchange
Growth %
P/L
Investments
% of
Investments
P/L Assets
P/L Exchange
transaction
(Rs in millions)
12,924
17,145
24,573
28,306
35,967
42,755
50,023
58,527
67,306
32.7%
43.3%
15.2%
27.1%
18.9%
17.00%
17.00%
15.00%
2,418
3,826
3,451
-526
-1,959
1,304
1,545
1,916
0.5%
0.7%
0.6%
-0.1%
-0.2%
0.10%
0.10%
0.10%
-10.5
7.0
41.9
40.2
-8.2
15.1
15.1
15.1
15.1
1,904
2,831
5,986
6,102
9,208
12,654
15,185
18,221
21,866
48.74%
111.43%
1.94%
50.91%
37.41%
20.00%
20.00%
20.00%
-
4.5
11.7
11.7
11.7
11.7
-1,029
-1,019
-1,009
-684
Growth %
Dividend
Income
Misc Income
Growth %
Non interest
Income
Total
Growth %
Business
Overview
1,030
430
-1,520
177
-1,294
-1,040
-58.2%
-453.3%
111.7%
-830.3%
19.7%
1.00%
1.00%
1.00%
2,239
5,687
8,333
9,770
7,380
9,670
15,474
18,763
22,788
15,162
22,832
32,906
38,076
43,352
52,437
65,509
77,302
90,106
50.6%
44.1%
15.7%
13.9%
21.0%
24.9%
18.0%
16.6%
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
10.Interest Paid
Interest on
Deposits
% of
Deposits
26,953
Growth %
Interest on
RBI and other
banks
% of
Deposits
2,741
Growth %
Other Interest
% of
Deposits
2,101
43,827
80,155
69,977
80,283
126,897
153,705
175,677
4.5%
5.7%
4.2%
3.9%
5.2%
5.20%
5.00%
5.00%
62.6%
82.9%
-12.7%
14.7%
58.1%
21.1%
14.3%
18.9%
2,424
8,848
7,455
13,364
22,529
27,034
32,441
38,929
27.3%
37.0%
30.6%
54.7%
98.1%
114.3%
133.1%
154.8%
-11.5%
265.0%
-15.7%
79.3%
68.6%
20.00%
20.00%
20.00%
2,620
109
431
203
470
581
713
895
7.3%
0.1%
0.4%
0.1%
0.2%
0.20%
0.20%
0.20%
-95.8%
295.6%
-52.8%
131.4%
23.6%
22.6%
25.5%
89111
77863
93851
149896
181321
208831
248693
Growth %
Total
Business
Overview
31795
48871
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
208,869
Appendix
Valuation :Estimates
11. Operating Expense
Payment to
Employees
Growth %
Depreciation
7,769
2,196
% of Gross
Block
Other Opex
14243
Growth %
Total
Growth %
Business
Overview
24,208
13,014
22,382
22,892
28,360
33,999
40,799
48,959
58,750
67.5%
72.0%
2.3%
23.9%
19.9%
20%
20%
20%
2,717
3,599
3,944
4,974
5,425
5,953.4
6,659.5
7,469.0
11.4%
9.1%
8.4%
9.5%
9.1%
9.00%
9.00%
9.00%
21725
29347
30809
38195
46477
56702
69176
84395
52.5%
35.1%
5.0%
24.0%
21.3%
22.00%
22.00%
22.00%
37,456
55,328
57,644
71,530
85,901
103,454
124,795
150,615
54.7%
47.7%
4.2%
24.1%
20.1%
20.4%
20.6%
20.7%
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
12. Provisions and Contingencies
Provision for
wealth tax
4.00
4.50
6.10
5.50
6.00
5.50
5.50
5.50
5.50
Provision for NPA
6912
10264
16058
19389
7630
6516
7769
9258
11012
1.62%
1.62%
1.54%
0.48%
0.33%
0.33%
0.33%
0.33%
0.00
0.00
0
0.00
934.00
0.00
0.00
0.00
1699
1897
1205
0
0
1505
1505
1505
1505
638
2683
1528
2011
11431
5412
5412
5412
5412
9252
14848
18797
21406
19067
14373
14692
16181
17934
4973
6905
10543
13404
18923
23461
27464
33577
40458
30.27%
31.96%
31.25%
32.52%
31.23%
30.00%
30.00%
30.00%
21752
29340
34810
37990
37833
42155
49758
58392
% of Net Advances
Provision for
diminution in value
of NPI
Provision for
standard assets
other provisions
and contingencies
Total
Provision for
Income tax
% of Operating
Profit
Total
Provisioning
Business
Overview
14225
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Valuation :Estimates
13. Asset Quality
GNPA to Gross
Advances (%)
NNPA to Net
Advances (%)
Opening balance
1.41%
1.95%
1.41%
1.05%
1.02%
1.05%
1.14%
1.19%
0.47%
0.63%
0.31%
0.19%
0.18%
0.21%
0.24%
0.25%
5,089
6,578
9,070
19,515
18,168
16,943
19,994
24,981
32,199
Additions during the
year
% of Advances
7,786
12,028
34,133
26,109
14,510
15,749
21,424
28,056
33,368
1.66%
1.90%
3.45%
2.07%
0.91%
0.81%
0.91%
1.00%
1.00%
Sub Total
12,875
18,605
43,203
45,624
32,677
32,692
41,418
53,037
65,567
1448
3.4%
21874
50.6%
662
0.1%
4308
9.4%
22487
49.3%
2524
0.2%
1525
4.7%
11685
35.8%
1971
0.1%
1315
4.0%
9413
28.8%
2354.25
0.10%
1656.70
4.00%
2805.59
0.10%
2121.49
4.00%
3336.84
0.10%
2622.70
4.00%
12425.28
30.0%
15911.19
30.0%
19670.23
30.0%
(27456.40)
(15734.00)
(12698.50)
(16436.24)
(20838.27)
(25629.77)
Less:
Upgradations
% of Advances
Recoveries
% of Gross NPA
Write Offs
% of Gross NPA
Reductions
Closing balance
Provision
Coverage
(6297.30) (9535.50) (23322.00)
48.9%
51.3%
54.0%
60.2%
48.1%
38.8%
39.7%
39.3%
39.1%
6,578
9,070
19,881
18,168
16,943
19,994
24,981
32,199
39,938
67.09%
68.43%
78.42%
82.51%
82.38%
80.48%
79.52%
78.77%
Valuation :Estimates
14. NNPA
Opening balance
Net Additions
% of GNPA
Addition
Reductions in the
year
% of Net NPA
Addition
Closing balance
NNPAs to Net
Advances (%)
1,551.8
2,028.9
2,985.2
6,276.2
3,920.5
2,964.1
3,523.3
4,875.3
6,593.6
546.8
981.0
4,004.2
-
351.2
1,764.7
2,571
3,367
4,004
12.00%
12.00%
12.00%
7.02%
69.7
8.16%
24.70
11.73%
0.00%
2.42%
11.21%
713.20
2355.70
1307.60
1205.50
1219
1648
2120
10.20%
37.53%
30.61%
25.49%
20.00%
20.00%
20.00%
4,875.3
6,593.6
8,478.3
2,028.9
2,985.2
6,276.2
3,920.5
2,964.1
3,523.3
0.43%
0.47%
0.63%
0.31%
0.19%
0.18%
0.21%
0.24%
0.25%
Movement of provision for NPAs
3,537.1
4,548.7
6,084.5
13,239.0
14,247.2
13,979.4
16,471
22,595
28,707
7,239
11,047
30,129
26,513
14,159
13,984
21,188
25,250
30,032
% of advances
1.5%
1.7%
3.0%
2.1%
0.9%
0.7%
0.90%
0.90%
0.90%
Write offs
% of Total
provision for NPA
6228
9511
22609
25505
14426
11493
15064
19138
23496
57.8%
61.0%
62.4%
64.2%
50.8%
41.1%
40.00%
40.00%
40.00%
4,548.7
6,084.5
13,604.5
14,247.2
13,979.4
16,470.7
22,595
28,707
35,243
Opening balance
Provision made
during the year
Closing balance
Company Risk :CAMELS Analysis
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
CAMELS Analysis :HDFC BANK
C
A
M
E
L
S
Ratios for CAMELS
CRAR
D/E
COVERAGE RATIO
NNPA
GSEC/Total
Investments
Standard Adv / Total
Advances
Business per
employee
Profit per employee
CDR
ROA
NII/Total Assets
Operating Profit /
Total Assets
Cost / Income
Cash / Total Assets
Gsec/ Total Assets
Liquid Assets / Total
Deposit
System and Control
Weights
Total
Weight
18%
HDFC
Score
Score
16.52%
9.04
8.75%
0.18%
B1
B2
B2
A1
7
6
6
10
30%
78.19%
A3
8
60%
98.30%
A2
9
6.54
C2
3
0.08
0.33%
1.53
3.60%
B3
A3
A3
A3
5
8
8
8
25%
2.65%
A3
8
25%
25%
25%
49%
4.40%
22.60%
A3
A2
A3
8
9
8
8.49%
B2
6
A3
8
7.5
B1
B1
70%
15%
15%
10%
25%
25%
50%
25%
25%
18%
18%
10%
18%
50%
100%
18%
Rating
Adjusted
W*IS
Ind Score
W*S
6.7
B2
1.206
8.8
A3
1.584
6
B2
1.08
8
A3
0.8
7.25
B1
1.305
8
A3
1.44
7.4
B1
B1
Rating
Adjusted
CAMELS Analysis : ICICI Bank
C
A
M
E
L
S
Ratios for CAMELS
CRAR
D/E
COVERAGE RATIO
NNPA
GSEC/Total
Investments
Standard Adv / Total
Advances
Business per
employee
Profit per employee
CDR
ROA
NII/Total Assets
Operating Profit /
Total Assets
Cost / Income
Cash / Total Assets
Gsec/ Total Assets
Liquid Assets / Total
Deposit
System and Control
Weights
Total
Weight
18%
ICICI
Score
Score
19.60%
7.23
9.70%
0.92%
A2
A3
B1
B3
9
8
7
5
30%
41.42%
B3
5
60%
95.54%
B2
6
7.08
C2
3
0.09
1.25%
1.47
2.15%
B3
C2
B1
B3
5
3
7
5
25%
2.00%
B2
6
25%
25%
25%
70.96%
3.43%
16.44%
B3
B1
B2
5
7
6
14.60%
A1
10
A3
8
6.6
B2
C1
70%
15%
15%
10%
25%
25%
50%
25%
25%
18%
18%
10%
18%
50%
100%
18%
Rating
Adjusted
W*IS
Ind Score
W*S
8.55
A3
1.539
5.6
B3
1.008
3.5
C2
0.63
5.75
B3
0.575
8.25
A3
1.485
8
A3
1.44
6.7
B2
C1
Rating
Adjusted
CAMELS Analysis: Axis Bank
Ratios for CAMELS
CRAR
C
A
M
E
L
S
D/E
COVERAGE RATIO
NNPA
GSEC/Total
Investments
Standard Adv / Total
Advances
Business per
employee
Profit per employee
CDR
ROA
NII/Total Assets
Operating Profit /
Total Assets
Cost / Income
Cash / Total Assets
Gsec/ Total Assets
Liquid Assets / Total
Deposit
System and Control
Weights
Total Wt
Axis
Score
Score
70%
18%
13.66%
B3
5
B3
5
18%
11.20
7.78%
0.28%
B3
A2
5
9
30%
62.87%
B1
7
60%
97.97%
A3
8
12.76
B2
6
0.14
0.77%
A3
B3
8
5
A3
8
B2
6
15%
15%
10%
25%
18%
25%
50%
25%
10%
25%
1.61
2.81%
25%
2.60%
A3
8
25%
25%
25%
45.14%
3.75%
20.47%
A3
A3
B1
8
8
7
6.33%
B3
5
A3
8
6.76
B2
B2
18%
50%
100%
18%
Rating
Adjusted
W*IS
Ind Score
W*S
5
B3
0.9
7.8
B1
1.404
6
B2
1.08
7.5
B1
0.75
6.25
B2
1.125
8
A3
1.44
6.70
B2
B2
Rating
Adjusted
CAMELS Analysis : YES Bank
Weights
Total
Wt
Yes
Score
Score
CRAR
70%
18%
17.90%
A3
8
D/E
15%
13.54
C2
3
COVERAGE RATIO
15%
6.33%
C1
4
NNPA
10%
0.05%
A1
10
GSEC/Total Investments
Standard Adv / Total
Advances
30%
58.29%
B2
6
60%
99.62%
A1
10
Business per employee
25%
17.48
A3
8
Profit per employee
25%
0.2
A2
9
CDR
50%
0.22%
A2
9
ROA
25%
1.42
B1
7
NII/Total Assets
Operating Profit / Total
Assets
25%
2.19%
B3
5
25%
2.09%
B2
6
Cost / Income
25%
37.71%
A2
9
Cash / Total Assets
25%
3.17%
B1
7
Gsec/ Total Assets
Liquid Assets / Total
Deposit
25%
21.96%
A3
8
50%
7.29%
B3
5
System and Control
100%
A3
8
Ratios for CAMELS
C
A
M
E
L
S
18%
18%
10%
18%
18%
W*IS
Ind Score
W*S
6.65
B2
1.197
8.8
A3
1.584
8.75
A3
1.575
6.75
B2
0.675
6.25
B2
1.125
8
A3
1.44
7.53
7.60
Rating
B1
Rating
B1
Adjusted
B1
Adjusted
B1
CAMELS Analysis :Kotak Mahindra Bank
C
A
M
E
L
S
Ratios for CAMELS
CRAR
D/E
COVERAGE RATIO
NNPA
GSEC/Total Investments
Standard Adv / Total
Advances
Business per employee
Profit per employee
CDR
ROA
NII/Total Assets
Operating Profit / Total
Assets
Cost / Income
Cash / Total Assets
Gsec/ Total Assets
Liquid Assets / Total
Deposit
System and Control
Weights
Total
Wt
18%
Kotak
Score
Score
17.92%
5.08
13.71%
0.51%
A3
A2
A1
B2
8
9
10
6
30%
57.14%
B2
6
60%
98.29%
A2
9
6.13
0.09
0.02%
1.22
4.25%
C2
B2
A1
B2
A2
3
6
10
6
9
25%
2.98%
A2
9
25%
25%
25%
67.48%
2.20%
19.59%
B2
B3
B1
6
5
7
9.81%
A3
8
A3
8
7.67
Rating
Adjusted
B1
B1
70%
15%
15%
10%
25%
25%
50%
25%
25%
18%
18%
10%
18%
50%
100%
18%
W*IS
Ind Score
W*S
8.45
A3
1.521
7.8
B1
1.404
7.25
B1
1.305
7.5
B1
0.75
7
B1
1.26
8
A3
1.44
7.68
Rating
Adjusted
B1
B1
CAMELS Analysis :SBI
Ratios for CAMELS
CRAR
C
A
M
E
L
S
D/E
COVERAGE RATIO
NNPA
GSEC/Total Investments
Standard Adv / Total
Advances
Business per employee
Profit per employee
CDR
ROA
NII/Total Assets
Operating Profit / Total
Assets
Cost / Income
Cash / Total Assets
Gsec/ Total Assets
Liquid Assets / Total
Deposit
System and Control
Weights
70%
Total
Wt
18%
SBI
Score
Score
13.68%
B3
5
C3
2
18%
14.80
4.65%
1.81%
C3
C3
2
2
15%
15%
10%
30%
78.11%
A3
8
60%
94.37%
B3
5
7.98
C1
4
0.05
0.80%
B3
B3
5
5
C3
2
25%
18%
25%
50%
25%
10%
0.91
25%
3.16%
B1
7
25%
2.23%
B2
6
25%
25%
25%
53.42%
4.33%
19.68%
B1
A2
B1
7
9
7
9.02%
B1
7
A3
8
5.91
B3
C1
18%
50%
100%
18%
Rating
Adjusted
W*IS
Ind Score
W*S
4.1
C1
0.738
5.6
B3
1.008
4.75
C1
0.855
5.5
B3
0.55
7.5
B1
1.35
8
A3
1.44
5.94
B3
C1
Rating
Adjusted
Monte Carlo Simulation – Sensitivity of Target Price
Risk
Affected parameter
Distribution
St Dev
Comments
2%
Upside risk from strategic
success
Downside risk from strategic
success
Upside risk from strategic
success
Strategic Risk
Retail Loan Growth
GNPA improvement
Retail loan book growth above Log Normal
30%
GNPA Improvement
Normal
Growth in Non Interest NII Growth above expectation
Income
0.3%
Normal
2%
Term Deposit Growth estimate
Log normal
2%
CASA growth estimate
Log normal
2%
Advances growth
Advances Growth estimate
Log Normal
2%
Moderate Inflation
Reduced cost of funds
Normal
0.5%
Increase in Forex Gains
Normal
2%
Macro Risk
Deposits growth
Upside
revival
Upside
revival
Upside
revival
Upside
revival
risk from economical
risk from economical
risk from economical
risk from economical
Financial Risk
Increased Forex gains
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Upside risk from currency
instability
Summary
Appendix
Other Key Risk
Senior Management Attrition
No area for diversification
Operational Risk
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
Altman Z Score
Factor 1
1.2 * (Working Capital/Total Assets )
Factor 2
1.4 * (Retained Earnings/Total Assets )
Factor 3
3.3 * (EBITAD/Total Assets )
Factor 4
0.6 * (MV of Equity/Total Liabilities )
Factor 5
0.99 * (Revenue/Total Assets )
Altman Z Score = 3
Interpretation of Altman Z Score
3.0 and above
The company is safe based on
these financial figures only.
1.99 to 2.99
Grey Zone
Less than 1.99
Probability of bankruptcy is
high
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Source :MacroAxis,Team Estimates
Summary
Appendix
Slowdown in the Economy: Structural Problems
Reduce Fiscal Deficit
• Current Account Deficit
• Fiscal Deficit
• Low Investment
Reduce
government
spending
• Impossible Trinity
– Interest Rates & Money Supply
– Capital Flows
– Exchange Rate
Investment
Falls
Reduce deficit
financing
Money supply
reduces
Inflation
reduces
Exports Fall
Current
Account
Deficit Rises
• Policy Paralysis
Business
Overview
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Interest rates
rise
Summary
Appendix
Sensitivity – Weightage Assigned to Valuation Models
Gordon Growth
Residual Income
Business
Overview
583.3
30%
40%
50%
60%
10%
582
585
587
590
20%
578
581
583
586
30%
574
577
579
582
40%
570
573
575
578
Investment
Rationale
Financial
Analysis
Valuation
Risk Analysis
Summary
Appendix
END OF PRESENTATION