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http://content.icicidirect.com/mailimages/ICICIdirect_HDFC_MangementMeetUpdate.pdf
G r o w t h m o m e n t u m t o c o n t i n u e …
We met the management of HDFC Ltd (HDFC) to get an insight into its
growth plans, the state of the housing finance industry and the
company’s current state of affairs. HDFC is the largest mortgage finance
company in India with an outstanding loan book of | 1322 billion as on
Q3FY12 mainly providing loans for the purchase or construction of
residential houses to individuals. It has a pan-India network of 304 outlets
including 74 outlets belonging to its wholly owned distribution company.
Over a period of time, it has also emerged as a financial conglomerate
with interests beyond mortgages (as depicted in exhibit 4). It has a track
record of consistent growth in business, strong asset quality, stable
margins, ability to raise funds easily and healthy return ratios, which
enables it to command high valuations.
ƒ Credit growth to continue undeterred
The management has reiterated that HDFC’s standalone operations will
continue to grow at 15-20% in the next four or five years (grew at 25%
CAGR in the last five years), owing to improved affordability, increasing
urbanisation, favourable demographics, tax incentives and housing
shortage in India. Mortgages as a percentage of GDP in India are just 9%
compared to China, Korea, the US and UK where it is 20%, 26%, 81% and
88%, respectively, indicating huge potential for growth. During 9MFY12,
the loan growth was 21% to | 1322 billion.
ƒ Asset quality to remain solid
As on Q3FY12, HDFC had witnessed the 28th consecutive quarter
wherein percentage of non-performing loans has been lower than the
corresponding quarter in the previous year. GNPA was at 0.82% while
NNPA was nil as on Q3FY12 with PCR of 100%. This has been possible
due to a conservative loan profile wherein maximum loan to value is 80%
(average loan to value is 66%), an experienced appraisal team, cash flow
based lending and strong in-house recovery and follow up team. We
believe HDFC will continue to have a healthy asset quality.
ƒ Well established subsidiaries to add to future profit and valuation
HDFC has three major subsidiaries namely HDFC Standard Life, HDFC
Asset Management and HDFC Ergo General Insurance, which already
have a strong foothold and market share in the country. Its current stake
in HDFC bank is 23.2%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_HDFC_MangementMeetUpdate.pdf
G r o w t h m o m e n t u m t o c o n t i n u e …
We met the management of HDFC Ltd (HDFC) to get an insight into its
growth plans, the state of the housing finance industry and the
company’s current state of affairs. HDFC is the largest mortgage finance
company in India with an outstanding loan book of | 1322 billion as on
Q3FY12 mainly providing loans for the purchase or construction of
residential houses to individuals. It has a pan-India network of 304 outlets
including 74 outlets belonging to its wholly owned distribution company.
Over a period of time, it has also emerged as a financial conglomerate
with interests beyond mortgages (as depicted in exhibit 4). It has a track
record of consistent growth in business, strong asset quality, stable
margins, ability to raise funds easily and healthy return ratios, which
enables it to command high valuations.
ƒ Credit growth to continue undeterred
The management has reiterated that HDFC’s standalone operations will
continue to grow at 15-20% in the next four or five years (grew at 25%
CAGR in the last five years), owing to improved affordability, increasing
urbanisation, favourable demographics, tax incentives and housing
shortage in India. Mortgages as a percentage of GDP in India are just 9%
compared to China, Korea, the US and UK where it is 20%, 26%, 81% and
88%, respectively, indicating huge potential for growth. During 9MFY12,
the loan growth was 21% to | 1322 billion.
ƒ Asset quality to remain solid
As on Q3FY12, HDFC had witnessed the 28th consecutive quarter
wherein percentage of non-performing loans has been lower than the
corresponding quarter in the previous year. GNPA was at 0.82% while
NNPA was nil as on Q3FY12 with PCR of 100%. This has been possible
due to a conservative loan profile wherein maximum loan to value is 80%
(average loan to value is 66%), an experienced appraisal team, cash flow
based lending and strong in-house recovery and follow up team. We
believe HDFC will continue to have a healthy asset quality.
ƒ Well established subsidiaries to add to future profit and valuation
HDFC has three major subsidiaries namely HDFC Standard Life, HDFC
Asset Management and HDFC Ergo General Insurance, which already
have a strong foothold and market share in the country. Its current stake
in HDFC bank is 23.2%.
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