HDFC & HDFC Bank to take 50% stake in Net Savvy Solutions - Views on News from Equitymaster

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  • Feb 16, 2000 - HDFC & HDFC Bank to take 50% stake in Net Savvy Solutions

HDFC & HDFC Bank to take 50% stake in Net Savvy Solutions

Feb 16, 2000

HDFC and HDFC Bank would together take a 50% stake in Net Savvy Solutions, an e-commerce solutions provider. The total stake is worth Rs 20 m. The Chennai based Net Savvy Solutions is promoted by California based Solution Net International, a Nasdaq listed company. HDFC (FY99 Total Income Rs 17.5 bn) is the largest housing finance company in India with a 55% market share. HDFC operates 41 offices and has a field force of more than 42,000 commission agents who mobilize retail deposits. HDFC Bank, promoted by the Housing Development Finance Corporation Ltd., provides a range of banking services including working capital finance, trade services, corporate finance and merchant banking. The bank also offers banking services via the Internet.

The entire idea for making such investments is to have access to related technologies. As the bank on its own does not have the skill to make the software for e-commerce and internet banking it makes sense for them to invest in companies which make these software. The ultimate purpose of such investment is to increase the speed of banking transactions and also to reduce the cost of transacting for both the retail banking client and also the corporate banking client.

Both HDFC and HDFC Bank have been aggressive about their internet plans. HDFC Bank has recently announced its tie-up with Singapore Telecom subsidiary Sesami.net to provide business to business e-commerce solutions for corporates. This would help corporates to automate their purchase and sales departments.

HDFC Bank has launched an online banking product provided by Solution Net, called ENet, which would allow corporates to access their accounts over the internet and carry out trade related transactions and cash management functions. ENet creates an on-line link between corporate clients' back office ERP/Processing systems and the bank. Solution Net develops the product and Net Savvy Solutions provides back-up support and helps implement the product.

HDFC Bank has recently also announced a product called BillPay for its internet customers, whereby they can pay their telephone bills from anywhere at their convenience. There are currently around 2 m internet users in India, this is growing at a very fast pace of 25%-30% per annum. As the internet is the most convenient and efficient mode those players in both the banking and financial sectors who have opted to use this will be able to increase profitability and efficiency faster if they are able to use technology and the net to their best advantage.

As HDFC Bank is one of the first few players to announce banking transactions through internet and they will be able to garner up a substantial market share as a result.

Market View:
HDFC has always been a favorite of analysts and fund managers as it has an excellent asset quality and a good management. The FIIs have already exhausted their 30% investment limit in the company. HDFC Bank has been rated a 'BUY' mainly on account of its excellent management, strong promoters, efforts taken by them to control the non performing assets (NPAs) and the fact that is technology savvy.

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