Financials · investment research
HDFC Bank
HDFCBANK
Verdict
WATCHLIST
low confidence · 3-5 years
Composite score
58/100
Weighted across all eight pillars
Business quality
59/100
Moat, returns, balance sheet, cash, management
Valuation score
33/100
At 46.4x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Good business, wrong price. Track it and wait for a better entry.
WHY
- • Profitability & returns scores 85/100 (stable) — ROCE was 26.4% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Cash conversion scores 75/100 (stable) — Reported profit is backed by operating cash.
- • Balance sheet scores 28/100 (improving) — Leverage is serviceable from current cash generation.
- • Industry & macro scores 68/100 (improving) — Financials (India) demand is improving.
WHERE
Financials · Large cap · position sized to at most 0% of an equity portfolio.
WHEN
Revisit if the price approaches ₹2,892 or earnings catch up with the multiple.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 22% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹2,892 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Governance — Related-party transactions at 6.2% of revenue
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check Repo rate — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
HDFC Bank is a competitively exposed financials business compounding revenue at 10.7% and profit at 11.4%, earning 26.1% on capital. Quality scores 59/100 and valuation 33/100 at 46.4x. The decision is therefore watchlist with low confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
HDFC Bank operates in the Indian financials sector with a large-cap footprint and a listed market value of about ₹1281k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Net interest margin and credit growth
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 26/100
Regulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
Segment mix
Growth 7.9% · margin 12.1% — Growing broadly in line with the overall business.
Growth 9.9% · margin 18.3% — Growing broadly in line with the overall business.
Growth 3.7% · margin 26.9% — Growing broadly in line with the overall business.
Growth 26.6% · margin 27.1% — Fastest growing part of the mix — watch whether margins hold as it scales.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
52/100Trend: stable · weight 14%
- MoatRegulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
- Segment concentrationRetail lending is 26.3% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin30.0%
Margin moved from 30.0% to 30.0% year on year.
Profitability & returns
85/100Trend: stable · weight 16%
- ROCE26.1%
ROCE was 26.4% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE24.7%
Return on equity after leverage — read alongside debt levels.
- Net margin12.3%
Share of every rupee of revenue that reaches reported profit.
Growth quality
55/100Trend: stable · weight 15%
- Revenue CAGR (4y)10.7%
Top-line compounding over the reported history.
- Profit CAGR (4y)11.4%
Profit is compounding faster than revenue — operating leverage is working.
- Growth sourceAsset-light / incremental
Capex is 8.0% of revenue this year.
Balance sheet
28/100Trend: improving · weight 12%
- Debt / EBITDA2.19x
Leverage is serviceable from current cash generation.
- Debt / equity1.50x
Capital structure relative to shareholder funds.
- Working capital101 days
Long cycle: each rupee of growth locks up more cash.
Cash conversion
75/100Trend: stable · weight 13%
- OCF / PAT101%
Reported profit is backed by operating cash.
- Free cash flow₹19,564 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
57/100Trend: stable · weight 14%
- Guidance delivery61% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding64.6% (+0.2 y/y)
Promoter ownership is stable or rising.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII +0.67 · DII -1.55
Direction of institutional ownership over the last year.
- Capital allocationGrowth has been part-funded with debt; increment…
Growth has been part-funded with debt; incremental returns need to clear the cost of that debt.
Industry & macro
68/100Trend: improving · weight 8%
- Demand trendimproving
Financials (India) demand is improving.
- StructureConsolidated
Consolidated — a few large players hold most of the profit pool.
- Competitive intensityhigh
How hard it is to keep pricing and share.
- Macro driversRepo rate, Credit growth, Asset quality cycle
Variables that move the earnings base regardless of company execution.
Valuation
33/100Trend: stable · weight 8%
- P/E vs sector46.4x vs 46.9x
At 46.4x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted4.07 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield1.53%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹2.94 L Cr | ₹70,676 Cr | ₹35,338 Cr | ₹32,864 Cr | ₹-5,419 Cr | 34.6% |
| FY2023 | ₹3.31 L Cr | ₹66,288 Cr | ₹45,739 Cr | ₹43,452 Cr | ₹23,566 Cr | 34.3% |
| FY2024 | ₹3.68 L Cr | ₹1.11 L Cr | ₹62,996 Cr | ₹61,106 Cr | ₹13,214 Cr | 22.5% |
| FY2025 | ₹4.05 L Cr | ₹1.22 L Cr | ₹70,532 Cr | ₹69,827 Cr | ₹25,238 Cr | 26.4% |
| FY2026 | ₹4.42 L Cr | ₹1.33 L Cr | ₹54,405 Cr | ₹54,949 Cr | ₹19,564 Cr | 26.1% |
- ⚠ Working capital cycle is long; growth consumes cash.
Ownership & management
Who owns it, and have they delivered?
Promoter
64.6%
+0.2 y/y
Pledge
None
No disclosed pledge
FII
4.9%
+0.67 y/y
DII
7.9%
-1.55 y/y
Guidance delivered in 61% of the last eight quarters; average leadership tenure 4 years.
Growth has been part-funded with debt; incremental returns need to clear the cost of that debt.
- ⚠ Related-party transactions at 6.2% of revenue
Industry & macro context
Financials (India)
Demand trend
improving
Cyclicality
low
Competition
high
Regulatory pressure
low
Consolidated — a few large players hold most of the profit pool.
Macro drivers: Repo rate · Credit growth · Asset quality cycle
Valuation
fair versus the sector
P/E
46.4x
Sector median P/E
46.9x
P/B
1.96x
Earnings yield
2.16%
FCF yield
1.53%
PE / growth
4.07
Estimated fair-value band ₹2,892 – ₹3,695 , built on FY2026 EPS of ₹71.4. Gap to the current price: +95.8%. Ranges are a modelling output, not a target price.
At 46.4x against a sector median of 46.9x, the price embeds roughly 31% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Governancehigh
Related-party transactions at 6.2% of revenue
Monitor: Annual report disclosures and auditor commentary.
- Accounting qualitymedium
Working capital cycle is long; growth consumes cash.
Monitor: Cash-flow statement versus P&L each quarter.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 26.1% | stays above 23% | falls for two consecutive years |
| Cash conversion | 101% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 10.7% CAGR | tracks the 31% priced in | slows for two quarters with no margin offset |
| Promoter holding | 64.6% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 58/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.
- • Accounting flags reduce the reliability of the reported profit base.