21 May , 2022 By : Kanchan Joshi
HDFC Bank and parent HDFC on Friday updated about their foreign investors' shareholding pattern. There is enough room for investors to buy in these two banking and financial behemoths. Foreign investors' shareholding in HDFC stands around 68.56%, while in HDFC Bank the holding is over 66.5%.
In its regulatory filing, HDFC said, "The Corporation has been receiving queries from several investors seeking information on its aggregate foreign shareholding. "
Thereby, HDFC clarified saying, "With a view to have a fair and transparent disclosure and in order to avoid selective disclosure, we wish to inform you that as on May 13, 2022, the total foreign shareholding in the Corporation is 68.56% of its total issued and paid-up share capital."
Further, in another separate filing, HDFC Bank intimated to stock exchanges that "as on May 13, 2022, the total foreign shareholding in HDFC Bank is 66.55% (including 20.98% of shareholding held by HDFC Limited and its subsidiaries - being promoters) of its total issued and paid-up share capital."
On April 4, HDFC Bank announced that parent HDFC will merge with the bank to enable seamless delivery of home loans and leverage on the large base of over 68 million customers of HDFC Bank and inter alia improve the pace of credit growth in the economy. The proposed transaction is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. It will also enable the underwriting of larger ticket loans, including infrastructure loans, an urgent need of the country.
Both the companies have announced their financial performance for the quarter ending March 31, 2022.
HDFC Bank posted a standalone net profit of Rs10,055.2 crore for the quarter ending March 2022 (Q4FY22) period, rising by a whopping 22.8% yoy. Net interest income (NII) in Q4FY22 stood at Rs18,872.7 crore rising by 10.2% yoy. While core net interest margin came in at 4% on total assets, and 4.2 percent based on interest-earning assets.
Further, HDFC Bank's gross non-performing assets in percentage were at 1.17% compared to 1.32% in Q4FY21 and 1.26% in Q3FY22. Net NPA also improved to 0.32% in the latest quarter against 0.40% and 0.37% in Q4FY21 and Q3FY22 respectively.
Meanwhile, in Q4FY22, HDFC posted a standalone net profit of Rs3,700 crore up 16% from Rs3,180 crore clocked in the year-ago period. The NII in Q4FY22 stood at Rs4,601 crore compared to Rs4,027 crore in the previous year, representing a growth of 14%.
As of March 31, 2022, the NBFC's assets under management (AUM) were at Rs6.53 lakh crore as against Rs5.69 lakh crore in the previous year. On an AUM basis, the growth in the individual loan book was 17% and the growth in the total AUM was 15%.
Post Q4 earnings, analysts are optimistic about both HDFC and HDFC Bank.
Kajal Gandhi, Vishal Narnolia, and Sameer Sawant, Research Analysts at ICICI Direct in HDFC's post-earnings research note said, "HDFC Ltd’s share price has grown ~2x in past five years. Market leadership in industry with growth opportunity & strong fundamentals bodes well. However, merger related uncertainty to keep price in a broad range."
According to the trio, HDFC's demand for individual loans in both affordable and higher end properties bodes well for business growth. Also, focus on non-individual lending to aid business growth & margin.
Further, the analysts expect HDFC's healthy provision buffer & improvement in collection to keep provision low. However, they added, merger related clarification and approval could lead to near term volatility.
ICICI Direct analysts have given a Buy recommendation on HDFC with a target price of Rs2840 per share.
Meanwhile, the analysts on HDFC Bank said, "HDFC Bank’s share price has grown by over 70% in the past five years. We believe the merger could result in increased volatility. However, the recent correction provides a good entry opportunity considering the kind of strong and consistent franchise HDFC Bank has been."
Key triggers for future performance in HDFC Bank as per the analysts are - strengthening of liability franchisee would aid in containing cost of fund in a rising interest rate scenario; focus on improving mix towards MSME should offset lending to better rated borrowers, rising corporate pie keeping margin in a tight band; and building up of physical/digital infra to drive growth though merger related clarification to precede fundamentals in the near term.
On HDFC Bank, the analysts said, "We remain positive and retain our BUY rating on the stock." They have set a target price of Rs1,650 apiece on the bank.
On Friday, HDFC shares closed at Rs2203.15 apiece up by 3.13% on BSE. HDFC Bank settled at Rs1320.70 apiece higher by 2.60%.
Year-to-date, FPIs have removed a whopping Rs1,62,299 crore from the equity market in India.