HDB Financal- Overview- Message Received

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Company's Overview

HDB Financial Services (HDBFS) is a leading Non-Banking Financial Company (NBFC) that caters to the growing needs of an Aspirational India, serving both Retail & Commercial Clients.

Incorporated in 2008, they are a well-established business with strong capitalization. HDBFS is accredited with CARE AAA & CRISIL AAA ratings for its long-term debt & Bank facilities and an A1+ rating for its short-term debt & commercial papers, making it a strong and reliable financial institution.

Products of the Company

The current product portfolio consists of three main categories i.e. Loans, Fee-based products, and BPO services.

A) Loans

Consumer Loans-   The Company provides White loans( Washing Machine and Refrigerator), Brown loans( such as televisions, audio equipment and similar household appliances etc) and digital products( such as Mobile Phones, Computer, and Laptops). The company also provides loans for household purpose.

Consumer Loans Portfolio includes:

1. Gold loan

2. Consumer Durable loan

3. Auto loans

4. Personal loans.

5. Loan against MFs.

B) Enterprise Loans:

Small and Medium Enterprise needs funding either for Working Capital, buying a new bid or setting up a new plant. The company offers secured and unsecured loans to these SMEs.

c) Asset Finance:

The company provides loans to purchase a new and old vehicle or the vehicles which generate income for the borrowers such as Truck, Tractors etc.

D) Fee-based products

The company is registered Corporate Insurance Agents which sells Life and General insurance products of HDFC Life and HDFC Ergo to the clients.

E) BPO Service

Collection Service- The company has a contracted with HDFC bank to collect dues from the borrowers. The company has set up 13 call centers across the country with a capacity of 4500 seats.

Infrastructure

The company has 1165 branches in 831 cities in Indian as on 31st March 2018.

Management of the HDB Financial Services

(i) Mr. Aditya Puri - Chairman & Non Executive Director

(ii) Mr. Bhavesh Zaveri - Non Executive Director

(iii) Mr. Jimmy Tata - Non Executive Director

Shareholding Pattern

HDFC Bank Limited holds 95.8694% Shares of HDB Financial Services as on 31.03.2018

Financial of the Company

Year	Rev(Cr)	PAT(Cr)	AUM	EPS	Book Value
2014	1,688.27	209.24	13560	4.32	31.70
2015	2,527.26	349.45	19290	6.63	44.68
2016	3,302.02	534.41	25906	7.64	50.87
2017	5714.54	698.77	34277	9.64	68.73
2018	7061.99	951.74	44469	12.18	79.22

UZ Financial Review

1. The Company has shown excellent Revenue Growth of  43% in the last 5 years.

2. The Company has shown excellent PAT Growth of  46% in the last 5 years.

3. The Company has excellent growth of AUM( Asset Under Management). As on 31st March 2018, they have close to 45000 Cr of the loan book.

4. The Company is paying good dividends. This year they have given 9% dividend per share on FV=10.

5.  The ratio of Gross non-performing assets to gross advances and net non-performing stands at 1.58% and 0.96% as on 31st March 2018. The company has manageable NPAs level.

Valuation of the Company

The company has listed peer in the name of Bajaj Finance Let us see do the comparison and arrives at the fair value of HDB Financial Services. The comparison has done by taking FY18 Financials.

a) Bajaj Finance:

1. Mcap = 169,367.86 Cr.

2. Book Value = 287.

3. Price = 2930.

4. P/B = 10.20

5. Revenue= 13000 Cr.

6. Revenue Growth of last 5 years = 34.84%

7. PAT Growth of last 5 years = 38.50%

b) HDB Financial Services Limited:

1. Revenue = 7000 Cr

2. Revenue Growth in last 5 years = 43%

3. Book Value = 79.22

4. PAT growth in last 5 years = 46%


If we give same valuation in terms of P/B of 10 to HDB Financial Services as in the case of Bajaj Finance , the Fair value as per FY18 Financials for HDB Financial Services comes out to be around 790-800 per Share.

At this price the HDB Financial Services commands a Mcap of 62000 Cr.

Note:

Recently in the last few weeks we have observed that the price of HDB Financial Services has shoot up like anything from 880 to 980 level in the anticipation of Right Issue coming. However, in the interest of Investor community we at UnlistedZone strongly believe the CMP of HDB is too high for an investor to buy.  

Even the HDFC Bank which is listed company is trading at P/B of 5.7.

The HDB Financial Services at the Current Market Price is Overvalued.

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Message from

Team UnlistedZone

Dealers in Unlisted shares

InvestorZone  ,232/12, New Kot Gaon, Ghaziabad, ,Dinesh Gupta, Partner

(m)08010009625,email: sales@unlistedzone.com Website https://unlistedzone.com/