Krish Mehta of Enam Holdings presented his investment thesis on HDFC Bank (India: HDFCB, US: HDB) at Best Ideas 2024.
HDFC Bank is the largest private sector bank in India and one of the top five most valuable banks globally, with a market capitalization of $150 billion.
HDFC Bank recently merged with HDFC Limited (its parent entity). The merger provides several synergies for the combined franchise given the 90% unpenetrated customer base of HDFC Bank for mortgages. Moreover, 65% of HDFC Limited’s existing borrowers were not banking with HDFC Bank, providing a major opportunity to garner deposits and to cross-sell and up-sell.
HDFC also has a unique business model built to weather cycles. The bank has a diverse loan book mix and best-in-class through cycle credit costs. Moreover, HDFC has built a formidable liability franchise, with the best productivity metrics in terms of deposits per branch. The bank has added the most incremental branches over the past five years and is well-positioned to galvanize incremental deposits and grow market share.
HDFC has consistently delivered ROAs near 2% for more than three decades, while growing assets and maintaining consistent ROEs along with adequate capital. The bank did not raise capital even during the covid crisis.
With 91+ million customers and a suite of product offerings, HDFC is a direct play on India’s growing consumption story. As India’s GDP per capita moves from $2,600 to $4,000 and beyond, credit will play a critical role in galvanizing the economy. HDFC stands to benefit from this strong growth tailwind.
HDFC Bank is available at 15x P/E (FY25E) and is trading near valuation levels last seen in the great financial crisis of 2008.
The following session updates Krish’s presentation from Best Ideas 2023.
The full session is available exclusively to members of MOI Global.
Members, log in below to access the full session.
Not a member?
Thank you for your interest. Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:
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.