Specialist in Indian Banking and Economic Research

Hemindra Hazari

Equity Bottom-Up

There are two features worth noting in <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> 4QFY2021 results. The first is the continuing de-emphasis on retail loans. This was visible in the lower retail loan growth and the poor performance of HDB Financial Services, the non-bank finance subsidiary which is bearing the brunt of the Covid induced slowdown in the economy. The second is the inability of the Bank to provide any clarity on when the Reserve Bank of India (RBI) could lift the ban on selling of credit cards and sales from digital products.  The bank’s inability to provide the market with clarity is probably because it does not yet have that clarity itself, as the technical audit authorised by the regulator is still ongoing. The periodic digital disruptions to the bank’s customers, a symptom of larger problems of inadequate investment in infrastructure, may further prolong the ban.The bank’s results overall were commendable for the current economic environment (although this analyst continues to disapprove of the rise in deferred tax assets), as it appears to have its asset quality under control. However, its Achilles Heel appears to be its information technology infrastructure, which may take some time to stabilise and provide comfort to the banking regulator.

There are two features worth noting in HDFC Bank (HDFCB IN) 4QFY2021 results. The first is the continuing de-emphasis on retail loans. This was visible in the lower retail loan growth and the poor performance of HDB Financial Services, the non-bank finance subsidiary which is bearing the brunt of the Covid induced slowdown in the economy. The second is the inability of the Bank to provide any clarity on when the Reserve Bank of India (RBI) could lift the ban on selling of credit cards and sales from digital products.  The bank’s inability to provide the market with clarity is probably because it does not yet have that clarity itself, as the technical audit authorised by the regulator is still ongoing. The periodic digital disruptions to the bank’s customers, a symptom of larger problems of inadequate investment in infrastructure, may further prolong the ban.The bank’s results overall were commendable for the current economic environment (although this analyst continues to disapprove of the rise in deferred tax assets), as it appears to have its asset quality under control. However, its Achilles Heel appears to be its information technology infrastructure, which may take some time to stabilise and provide comfort to the banking regulator. 

HDFC Bank: Commendable Results but Technology Issues Remain

India Financials

Saumya Agarwal

HDFC Bank, reported its Q4FY21 results today. With the Supreme Court lifting the stay on NPA classification, all eyes were on the asset quality of the Bank. Covid seems to have impacted the Retail book more, for HDFC bank as it resorted to resolution of personal loans and also dipped into contingent provisions, thereby keeping the NPA’s at bay.  All other parameters were largely steady

HDFC Bank, reported its Q4FY21 results today. With the Supreme Court lifting the stay on NPA classification, all eyes were on the asset quality of the Bank. Covid seems to have impacted the Retail book more, for HDFC bank as it resorted to resolution of personal loans and also dipped into contingent provisions, thereby keeping the NPA’s at bay.  All other parameters were largely steady

HDFC Bank Q4FY21:Covid Impacts Retail Book Even as Resolution of Retail Loans Keeps NPA's at Bay

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div>Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. </div><div>NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020, it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. </div><div>Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20. Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium. </div><div>
We have covered various aspects of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/ngern-tid-lor-pre-ipo-pre-covid-growth-track-record-has-been-very-strong" target="_blank" rel="noopener">Ngern Tid Lor Pre-IPO - Pre-COVID growth track record has been very strong</a> and <a href="https://www.smartkarma.com/insights/ngern-tid-lor-pre-ipo-peer-comparison-playing-catch-up-after-being-left-behind" target="_blank" rel="noopener">Ngern Tid Lor Pre-IPO - Peer Comparison - Playing Catch up After Being Left Behind</a>.
In this note we’ll talk about valuation and deal dynamics.
</div>

Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020, it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20. Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium. 
We have covered various aspects of the deal in our earlier note, Ngern Tid Lor Pre-IPO - Pre-COVID growth track record has been very strong and Ngern Tid Lor Pre-IPO - Peer Comparison - Playing Catch up After Being Left Behind.
In this note we’ll talk about valuation and deal dynamics.


Ngern Tid Lor IPO - Not Really at a Large Discount but the Overall Sector Has Been Doing Very Well

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Pre-release Says Nothing About Capital And Credit: Bajaj Finance (BAF.IN) [Bajaj] released a FY 4Q21 balance sheet update, ahead of its scheduled earnings update. Key highlights were limited to: AUM growth; new customer acquisition; and deposit growth; and  *Credit Challenges Far From Over With: The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 23.0 bn during FY 3Q21 – increasing at 520% on an annualized basis. By our calculation, reserves need to increase INR 177 bn or nearly 8x - representing nearly three years of PBT and over 50% of shareholder’s equity.

*Pre-release Says Nothing About Capital And Credit: Bajaj Finance (BAF.IN) [Bajaj] released a FY 4Q21 balance sheet update, ahead of its scheduled earnings update. Key highlights were limited to: AUM growth; new customer acquisition; and deposit growth; and  *Credit Challenges Far From Over With: The day of reckoning is coming for Bajaj as net new NPLs amounted to INR 23.0 bn during FY 3Q21 – increasing at 520% on an annualized basis. By our calculation, reserves need to increase INR 177 bn or nearly 8x - representing nearly three years of PBT and over 50% of shareholder’s equity.

*Positive Spin Still Off From Organizational Reality: HDFC Bank (HDFCB.IN) [HDFCB] released a FY 4Q21 balance sheet update, two weeks ahead of its scheduled financial results announcement on April 17, 2020. HDFCB tried to place a positive spin on its lending and deposit share gain update; and *Back to Reality: On an apples-to-apples basis, we find that HDFCB’s stated gross NPLs increased 18.1% linked quarter. Inclusive of NCOs of INR 34 bn, however, we calculate that net new NPLs actually increased INR 65 bn or 151% on an annualized basis. Provisions barely cover NCOs. By our calculation, reserves are currently short by nearly INR 328 bn or over a year of core operating results based on FY 3Q21 results. An update on credit would have been more helpful.

*Positive Spin Still Off From Organizational Reality: HDFC Bank (HDFCB.IN) [HDFCB] released a FY 4Q21 balance sheet update, two weeks ahead of its scheduled financial results announcement on April 17, 2020. HDFCB tried to place a positive spin on its lending and deposit share gain update; and *Back to Reality: On an apples-to-apples basis, we find that HDFCB’s stated gross NPLs increased 18.1% linked quarter. Inclusive of NCOs of INR 34 bn, however, we calculate that net new NPLs actually increased INR 65 bn or 151% on an annualized basis. Provisions barely cover NCOs. By our calculation, reserves are currently short by nearly INR 328 bn or over a year of core operating results based on FY 3Q21 results. An update on credit would have been more helpful.    

HDFC Bank – Update Does Little To Quell Fears

India

HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.

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HDFC Bank (HDFCB IN)

HDFC Bank: Commendable Results but Technology Issues Remain

Commendable performance but Achilles Heel appears to be its inadequate information technology infrastructure, which may take some time to stabilise...

Hemindra Hazari

HDFC Bank Q4FY21:Covid Impacts Retail Book Even as Resolution of Retail Loans Keeps NPA's at Bay

HDFC Bank's retail book seems to have borne the brunt of the Covid impact. However, Resolution of the stressed retail loans and utilization of...

Saumya Agarwal

Ngern Tid Lor IPO - Not Really at a Large Discount but the Overall Sector Has Been Doing Very Well

Ngern Tid Lor aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly...

Sumeet Singh

Bajaj Finance – Who’s Kidding Whom?

BAJAJ FINANCE: Bajaj gave a FY 4Q21 update on AUM; customer acquisition; and deposit growth. No disclosure on how it will deal with India's worst...

Thomas J. Monaco

HDFC Bank – Update Does Little To Quell Fears

HDFC BANK: HDFCB released a FY 4Q21 balance sheet update. HDFCB tried to place a positive spin on its lending and deposit share gain update....

Thomas J. Monaco

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