HDFC 2021-22 Annual Report Analysis

Thu, 31 Mar

HDFC has announced its results for the year ended March 2022. Let us have a look at the detailed performance review of the company during the year 2021-22.

HDFC Income Statement Analysis

• Interest income during the year fell 2.2% on a year-on-year (YoY) basis.
• Interest expenses were down by 6.2% YoY during the same period.
• Operating expenses declined by 2.8% YoY during the year.
• The company's net interest income (NII) decreased by 1.2% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 11.7% in FY22 as against 13.7% in FY21.
• Other income increased by 1798.5% YoY during the year.
• Net profit for the year increased by 20.6% YoY.
• Net profit margins during the year increased to 16.6% in FY22 from 13.5% in FY21.

HDFC Income Statement – 2021-22

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*	% Change
Interest Income	Rs m	1,390,392	1,359,258	-2.2%
Other Income	Rs m	425	8,059	1798.5%
Interest Expense	Rs m	292,212	273,974	-6.2%
Net Interest Income	Rs m	1,098,181	1,085,283	-1.2%
Operating Expense	Rs m	921,893	896,333	-2.8%
Pre-provision Operating Profit	Rs m	176,712	197,010	11.5%
Provisions & Contingencies	Rs m	470	482	2.6%
Profit before tax	Rs m	242,373	282,518	16.6%
Tax	Rs m	37,498	42,097	12.3%
Profit after tax	Rs m	187,401	225,947	20.6%
Minority Interest	Rs m	-17,475	-14,474	17.2%
Net Interest Margin	%	13.7	11.7
Net profit margin	%	13.5	16.6

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HDFC Balance Sheet Analysis

• The company's deposits during FY22 stood at Rs 998.8 bn as compared to Rs 936.0 bn in FY21, thereby witnessing an increase of 6.7%.
• Advances for the year stood at Rs 5,639.2 bn as compared to Rs 4,909.5 bn during FY21, a rise of 14.9%.
• Cost of deposits for HDFC fell 11.5% and stood at 9.9%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 3,602.1 bn during the year from Rs 3,085.3 bn in FY21.
• Borrowing stood at Rs 952.2 bn, a growth of 1.0% as compared to previous year.
• Overall, the total assets and liabilities for FY22 stood at Rs 9,647.8 bn as against Rs 8,275.0 bn during FY21, thereby witnessing a rise of 16.6%.

HDFC Balance Sheet – as on March 2022

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*	% Change
Networth	Rs m	1,551,314	1,780,701	14.8%
Advances	Rs m	4,909,478	5,639,203	14.9%
Deposits	Rs m	936,039	998,796	6.7%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	11.2	9.9
Investments	Rs m	3,085,268	3,602,137	16.8%
Borrowings	Rs m	943,177	952,201	1.0%
Total Assets	Rs m	8,275,011	9,647,831	16.6%

Current Valuations for HDFC

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 124.6, an improvement from the EPS of Rs 103.9 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 2,645.9, stands at 20.3 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 2.7 times, while the price to income ratio stands at 3.4 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*
Income per share (Unadj.)	Rs	770.7	749.7
Earnings per share (Unadj.)	Rs	103.9	124.6
Diluted earnings per share	Rs	102.4	123.4
Avg P/E ratio	Rs	21.1	20.3
Avg P/ABV ratio	Rs	2.6	2.7
Avg Market Cap	Rs	3,949,290	4,593,670
Dividends per share (Unadj.)	Rs	23.00	30.00

Ratio Analysis for HDFC

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio improved and stood at 564.6x during FY22, from 524.5x during FY21. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio decreased and stood at 1.10x during FY22, from 1.21x during FY21. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): HDFC's capital adequacy ratio (CAR) was at 22.8% as on 31 March 2022 as compared to 22.2% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company improved and stood at 12.7% during FY22, from 12.1% during FY21. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company improved and stood at 2.34% during FY22, from 2.26% during FY21. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company deteriorated and stood at 8.62% during FY22, from 9.25% during FY21. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. HDFC's gross NPA ratio stood at 0.0% as of 31 March 2022 compared to 0.0% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of HDFC was 1.1% in financial year 2022. This compared with 1.2% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-21*	12 Mar-22*
Credit/Deposit Ratio	x	524.5	564.6
Debt to Equity Ratio	x	1.2	1.1
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	22.2	22.8
Return on Equity	%	12.1	12.7
Return on Assets	%	2.3	2.3
Return on Capital Employed	%	9.3	8.6
% of Gross NPAs	%	0.0	0.0
% of Net NPAs	%	1.2	1.1
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how HDFC has performed over the last 5 years, please visit here.

HDFC Share Price Performance

Over the last one year, HDFC share price has moved up from Rs 2,219.9 to Rs 2,645.9, registering a gain of Rs 426.0 or around 19.2%.

Overall, the S&P BSE SENSEX is up 7.8% over the year.

(To know more, you can check out historical annual results for HDFC here and quarterly results for HDFC here)

Read: Latest Annual Report Analysis of HDFC