HDFC 2022-23 Annual Report Analysis

Thu, 10 Aug

HDFC has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during the year 2022-23.

HDFC Income Statement Analysis

• Interest income during the year rose 12.5% on a year-on-year (YoY) basis.
• Interest expenses were up by 35.2% YoY during the same period.
• Operating expenses increased by 7.7% YoY during the year.
• The company's net interest income (NII) increased by 6.8% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 11.1% in FY23 as against 11.7% in FY22.
• Other income increased by 168.0% YoY during the year.
• Net profit for the year increased by 15.8% YoY.
• Net profit margins during the year increased to 17.1% in FY23 from 16.6% in FY22.

HDFC Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	1,359,258	1,529,403	12.5%
Other Income	Rs m	8,059	21,598	168.0%
Interest Expense	Rs m	273,974	370,286	35.2%
Net Interest Income	Rs m	1,085,283	1,159,117	6.8%
Operating Expense	Rs m	896,333	965,098	7.7%
Pre-provision Operating Profit	Rs m	197,010	215,616	9.4%
Provisions & Contingencies	Rs m	482	607	26.0%
Profit before tax	Rs m	282,518	321,306	13.7%
Tax	Rs m	42,097	44,308	5.3%
Profit after tax	Rs m	225,947	261,609	15.8%
Minority Interest	Rs m	-14,474	-15,389	-6.3%
Net Interest Margin	%	11.7	11.1
Net profit margin	%	16.6	17.1

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HDFC Balance Sheet Analysis

• The company's deposits during FY23 stood at Rs 1,110.0 bn as compared to Rs 998.8 bn in FY22, thereby witnessing an increase of 11.1%.
• Advances for the year stood at Rs 6,245.5 bn as compared to Rs 5,639.2 bn during FY22, a rise of 10.8%.
• Cost of deposits for HDFC fell 5.3% and stood at 9.4%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 4,173.6 bn during the year from Rs 3,602.1 bn in FY22.
• Borrowing stood at Rs 876.8 bn, a fall of 7.9% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 10,897.8 bn as against Rs 9,647.8 bn during FY22, thereby witnessing a rise of 13.0%.

HDFC Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	1,780,701	1,999,727	12.3%
Advances	Rs m	5,639,203	6,245,515	10.8%
Deposits	Rs m	998,796	1,109,979	11.1%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	9.9	9.4
Investments	Rs m	3,602,137	4,173,582	15.9%
Borrowings	Rs m	952,201	876,846	-7.9%
Total Assets	Rs m	9,647,831	10,897,807	13.0%

Current Valuations for HDFC

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 142.6, an improvement from the EPS of Rs 124.6 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs {{shareprice}}, stands at 17.1 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 0.0 times, while the price to income ratio stands at 2.9 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	749.7	833.7
Earnings per share (Unadj.)	Rs	124.6	142.6
Diluted earnings per share	Rs	122.0	141.3
Avg P/E ratio	Rs	20.3	17.1
Avg P/ABV ratio	Rs	0.0	0.0
Avg Market Cap	Rs	4,593,670	4,478,060
Dividends per share (Unadj.)	Rs	30.00	44.00

Ratio Analysis for HDFC

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio deteriorated and stood at 562.7x during FY23, from 564.6x during FY22. 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 0.99x during FY23, from 1.10x during FY22. 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 0.0% as on 31 March 2023 as compared to 22.8% 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 13.1% during FY23, from 12.7% during FY22. 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 2.40% during FY23, from 2.34% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 9.40% during FY23, from 8.62% during FY22. 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 2023 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 0.0% in financial year 2023. This compared with 1.1% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	564.6	562.7
Debt to Equity Ratio	x	1.1	1.0
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	22.8	0.0
Return on Equity	%	12.7	13.1
Return on Assets	%	2.3	2.4
Return on Capital Employed	%	8.6	9.4
% of Gross NPAs	%	0.0	0.0
% of Net NPAs	%	1.1	0.0
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

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Overall, the S&P BSE SENSEX is {{bsesensexupdown}} {{bsesensexchgpercabs}} over the year.

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