HDFC is India’s premier financier in mortgage lending. As at FY21 end, HDFC’s outstanding AUM stood at ~Rs5.7tn. HDFC offers loans to retail and corporate customers. About 77% of its loan book comprises of retail loans and the rest of commercial real estate loans, lease rental discounting, etc. HDFC’s conservative underwriting practices reflect in its low NPAs and credit losses. Since inception, it has written off only 0.04% of cumulative loan disbursements. As of FY21, HDFC GNPA stood at 1.98%. Despite increasing competition, HDFC’s market leadership and profitability have remained intact, endorsing its strong competitive position.

Investment Rationale
Key Highlights of 2QFY22: a) Spreads were stable QoQ at 2.29%; b) GS3% declined 10bps QoQ to 2.5%; c) Restructured loans increased 50bps QoQ 1.4%. Of the total restructured loans, ~63% is towards the individual segment. One large account constitutes ~35% of restructured loans and Company expects 50% repayment in the near term from this account; d) ATS for the quarter stood at Rs3.27m (+15% YoY); e) ECL% marginally declined, by 8bps QoQ to 2.56%.