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🏦 HDFC Bank – India’s Leading Private Sector Bank & Long-Term Wealth Compounder

Lesson 140/225 | Study Time: 15 Min

Course: Top Quality Companies

🏦 HDFC Bank – India’s Leading Private Sector Bank & Long-Term Wealth Compounder

📌 Company Overview

Founded in 1994, HDFC Bank has grown from a small private lender into India’s largest private sector bank by market capitalization, driven by its consistent growth in advances, deposits, fee income, and a robust risk management framework. Following its merger with HDFC Ltd. in FY2024, the bank has significantly expanded its loan book, diversified into housing finance, and strengthened cross-sell capabilities across insurance, asset management, and investment services.

🌏 Fairvalue:

https://docs.google.com/spreadsheets/d/e/2PACX-1vRg1tSKFe-u3gKrsjyojpraa0BgCp8uc91CDC5EW5wLCHb_RJ8_6sbNVHNBNtQ6Ww/pubhtml?gid=1098740149&single=true

🌏 Industry Overview

India’s banking sector is poised for steady growth due to:

Rising credit penetration and formalization of the economy 📈
Strong GDP growth supporting loan demand
Expanding retail credit market in housing, vehicle, and unsecured segments
Digital adoption accelerating cost efficiencies and customer reach

Private sector banks like HDFC Bank benefit from superior asset quality, strong liability franchise, and technological leadership.

📈 Historical Growth – Advances, Revenue, and Profits

Year	Advances (₹ Cr)	Revenue (₹ Cr)	Net Profit (₹ Cr)	NPM %
FY1996	369	128	20	15.6%
FY2010	1,25,831	19,981	2,949	14.8%
FY2020*	9,93,703	1,47,068	27,254	18.5%
FY2024†	25,71,916	4,07,995	64,062	15.7%
FY2025	27,24,938	4,24,053	63,845	15.1%
TTM FY26	27,35,109	4,40,111	63,628	14.5%

*Adjusted for splits, †Merger with HDFC Ltd.

🚀 25-Year CAGR:

Advances: 31%
Revenue: 28%
Net Profit: 29%
EPS: 22%

🛡 Asset Quality – GNPA (%) History

From FY2008 onward, GNPA ratios have remained among the lowest in the industry:

Peak GNPA: 2.0% in FY2009 (global financial crisis)
Current GNPA: 1.4% (TTM FY26) – marginal increase due to macro headwinds and merger impact.

📊 Valuation Bands – PE & PBV History

P/E: Historically ranged 15x–28x, with long-term average near 21x.
P/BV: Historically ranged 2.3x–4.8x, with post-merger consolidation bringing PBV closer to 2.5–2.9x.

🆕 Latest Q1 FY26 Performance

Revenue: ₹1,33,054 Cr (↑ 13.7% YoY)
Net Profit: ₹16,258 Cr (↓ 1.3% YoY due to higher provisions)
EPS: ₹21.23 (↓ 2.0% YoY)
Margin: 12.2% vs. 14.1% YoY
Provisions: ₹15,313 Cr (↑ 387% YoY, largely due to one-off items)
GNPA: 1.4% vs. 1.33% YoY

📂 Subsidiary & Associate Contributions

SEGMENT	STAKE	Investment	Profit	BookValue	EPS	Sales Gr	Pr Gr
HDBFSL	74.19%	2900	570	225	7	14%
HDFC Life	50.28%	5600	550	79	3	16%	14%
HDFC ERGO	50.33%	2800	210	70	3	-6%	62%
HDFC AMC	52.44%	200	750	326	35	27%	24%
HSL	94.38%	1300	230	1929	130	-11%	-21%
Others		300	40

TOTAL		13100	2350	2630	178	17.80%	-1.3%

💰 Cost Structure – Q1 FY26

Cost Head	₹ Cr	Share	Growth YoY
Interest	47,708	43%	7.0%
Employee	8,897	8%	7.3%
Claims	28,073	25%	4.9%
Other Cost	12,212	11%	6.1%
Provisions	15,313	14%	387.2%

📅 FY26 and Long-Term Estimates

Year	Advances (₹ Cr)	Revenue (₹ Cr)	Net Profit (₹ Cr)	EPS (₹)	Margin %
FY26E	29,15,684	4,62,218	62,399	91	13.5%
FY30E	50,99,549	8,08,422	1,39,049	203	~17%
FY35E	89,87,148	14,24,715	2,45,051	357	~17%

📈 Valuation Range Estimates

Year	EPS (₹)	BV (₹)	Low Price	Fair Value	High Price
FY26E	91	755	₹1,509	₹1,858	₹2,206
FY30E	203	1,105	₹3,363	₹4,140	₹4,916
FY35E	357	1,780	₹5,927	₹7,295	₹8,664

CMP ₹1,992 – near FY26 fair value.

⚖️ Portfolio Weightage

Suggested 3.97%/5% allocation as per current valuations in a diversified portfolio, given HDFC Bank’s consistent track record, strong moat, and stable asset quality.

✅ Conclusion – Risk & Reward Balance

Positives:

Market leader in advances & deposits among private banks
Strong subsidiaries in insurance, AMC, and NBFC adding to earnings
Low GNPA ratio and consistent RoE track record
Merger synergies to enhance cross-selling and balance sheet strength

Risks:

Near-term pressure on margins due to merger integration costs
Elevated provisions impacting short-term profitability
Competitive intensity in retail and SME lending
Regulatory changes in banking & financial services

📌 Investor View: Ideal for long-term compounding; SIP accumulation recommended during consolidation phases.

📢 Disclosure

This blog is for educational purposes only. Data is based on publicly available financials and reasonable assumptions, not an investment recommendation.

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Piyush Patel

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