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| A Complete Deep-Dive report on
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About The Company
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Headquartered in Mumbai and having its branches in many of India's largest cities and towns, HDFC Securities was established in 2000. HDFC Bank which owns a 95.6% stake in HDFC Securities is its holding company.
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Indocean Securities Holdings Limited, HDFC Bank and HDFC Limited initially collaborated on it as a joint venture. It offers a vast array of financial services and products related to debt, real estate, gold, and equity.
Major Milestones
- HDFC Securities MF AUM has grown 17% vs Industry AUM growth of 7% due to increased focus on SIP book and new client participation.
- 7th Largest IPO DIstributor (Maintained leadership with 21% market share)
- 6th Largest Sip Distributor (Sip doubled from 3.4L to 6.8L)
- 3rd Largest Life Insurance Mobilizer
Dividend History
- FY2023 - INR 440/sh
- FY2022 - INR 547/sh
- FY2021 - INR 318/sh
- FY2020 - INR 135/sh
- FY2019 - INR 110/sh
HDFC Securities New Platform
- A discount broking platform that allows trading and investing at a
single price point of Rs 20 similar to other online platforms such as
Groww, 5Paisa, and Zerodha.
- HDFC Sky's USP is its
margin trading facility which is available at a 12% interest rate
whereas its competitors charge between 18 to 21%
- Its target market is Gen-Z, millennials, and new-age investors.
- HDFC Sky is accessible to everyone, in contrast to HDFC Securities,
which restricts demat account opening, trading, and investment to HDFC
Bank customers only.
Financials
In FY 21-22, HDFC Securities profitability increased by 2.5 times,
from ₹384 crores to ₹984 crores. Its profits for FY23 were ₹777 crores,
which resulted in consolidation due to sluggish market conditions,
inflationary trends, and a higher base.
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9 Months FY2023 Results
- HDFC Securities’ revenue increased by an astounding 28%
in 9MFY24, from INR 1,400 Crore in 9MFY23 to INR 1,800 Crore. The
company’s expanding market presence and successful strategic efforts are
the reasons behind this revenue spike
- A reduction in the EBITDA margin from 58% to 50% in spite of the increase in revenue indicates that the company’s cost control methods require examination.
- Despite the considerable gain in revenue, the Profit After Tax growth of 8% suggests a slight rise in net earnings. This implies that not every rise in revenue has resulted in higher earnings at the bottom.
Angel Broking Comparison Analysis
1. Growth in Revenue and PAT
- The first nine months of 9MFY23 saw
angel broking generate 2915 Cr in revenue, up from 2176 Cr in 9MFY24. a
34% increase. The revenue increase of Angel Broking, at 34%, is slightly
higher than that of HDFC Securities.
- Additionally, PAT increased from 624
Cr in 9MFY23 to 785 Cr in 9MFY24. a 25% increase. The 25% PAT increase
for Angel Broking is a significant improvement over HDFC Securities,
indicating either more effective cost control or a more diverse revenue
mix.
2. Market Value
- Angel Broking has a capitalization of
INR 28,000 crore and a P/E ratio of 26x, which indicates a higher market
valuation. The market’s assessment of the companies’ growth prospects
and investor trust in Angel Broking may be reflected in this valuation
discrepancy.
HDFC Securities Investment Considerations
1. Placement in the Market
- Being a reputable brand in the
financial services industry, HDFC Securities has room to develop,
especially given its current unlisted market valuation.
2. Macroeconomic Well-being
- Potential investors should be wary of
the decline in EBITDA margin. The way that HDFC Securities handles cost
management and how that affects overall profitability must be closely
observed.
3. Comparative Effectiveness
- The listed market performance of Angel
Broking provides a useful yardstick. It is important to take into
account variations in consumer segmentation, market strategies, and
company structures while assessing HDFC Securities’ potential.
4. Possibility of Gain
- HDFC Securities might be a profitable
investment given its current market valuation and development
trajectory. Particularly if it maintains its growth momentum after
becoming public.
Valuation
At the moment, ICICI Securities is
trading at a P/E of 17.5, Angel One is trading at a P/E of 25.5 and Hdfc
Securities is valued at a P/E of 20.4x
The valuations seems reasonable in
comparison to its peers. From its peak of 18,500, HDFC Securities has
demonstrated a healthy correction of almost 45%, and given the current
values and business performance, it may be an intriguing opportunity.
Key Numbers (as of Jan'2024)
- P/E - 22x
- P/B - 9x
- EPS - INR 490
- BVPS - INR 927
- Market Price - INR 10800
- Market Cap - INR 15800 Cr
IPO Plans
Final Thoughts
In its pre-IPO stage, HDFC Sec shows
great development potential; nonetheless, issues with cost control need
to be carefully considered. The parallel to Angel Broking clarifies its
place in the market and its prospects within the larger financial
services industry. Before choosing to invest in HDFC Securities,
investors are recommended to take market conditions, investor mood, and
strategic efforts into account. An important turning point in the
company’s development may be the impending IPO, which could reveal value
to investors prepared to study the subtleties of the broking industry.
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