HDFC Bank: Sustainably Growing Market Share Leader in India

Krish Mehta of Enam Holdings presented his investment thesis on HDFC Bank (India: HDFCB, US: HDB) at Best Ideas 2023.

Thesis summary:

HDFC Bank is India’s largest private sector bank with an unparalleled track record in terms of book quality, ROA, ROE, and consistent growth.

Krish views HDFC Bank as a leveraged play in the consumption space with a robust balance sheet and best-in-class asset quality that has proven its resilience over three decades across cycles. It has proven its resilience amidst adversity as seen during COVID-19 when it was one of the only large banks globally that navigated the turbulent times without raising capital while maintaining low credit costs. Given the deeply underpenetrated market in India in terms of GDP per capita vs. loan penetration, as well as the structural tailwinds for the country, HDFC Bank is poised to capitalize in this credit and business cycle in addition to its intrinsic business strength and moat.

The recent de-rating in the stock has been driven by concerns around the announced merger with HDFC Limited, India’s premier housing finance company. Krish believes these concerns are short-term in nature and ignore the long-term value accretive nature of this merger that will improve the quality of HDFC as a combined entity. The merger uncertainty has presented an opportunity to buy HDFC Bank at historically low valuations and own a best-in-class business that will compound consistently without raising capital in the foreseeable future.

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About the instructor:

Krish Mehta is a value investor from Mumbai, India. He is an Investment Analyst at Enam Holdings in Mumbai, a reputed family office. Enam runs a concentrated book and takes five- to ten-year views on businesses, practicing a long-term value-focused investment philosophy. Krish’s role at Enam is conducting bottom-up, fundamental research of Indian and global equities across sectors, portfolio management, and covering global macro. Krish graduated from the NYU Stern Undergraduate School of Business in 2019 with a BS in Finance and Accounting and interned at a long/short hedge fund in London, Theleme Partners, for two summers prior to joining Enam.

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