HDFC’s retail loan growth is accelerating…30% in 9MFY13, versus 20% over 2009-12. There’s a strategic reason…rising capital generation…so, leverage or return. The market also probably wants to see more retail assets…than wholesale ones (albeit higher return, not valued up as
much)
What’s driving higher growth? … The asset distribution machinery…and HDFC Sales will be the most material part of it going forward. In-house loan acquisition arm (100% subsidiary)…operates on a no profit / loss basis. Is the primary loan sourcing arm, accounts for 46% of new retail
loans in FY12…has stayed at that level for a few years.
HDFC-S isn’t the only in-house asset acquisition unit in the market and has its challenges (people, incentives, real estate business, work
practices). But it is probably the most focused (primarily single product), mature, controlled (costs/risks) one out there, and should be more material to HDFC’s higher growth strategy than ever before.
HDFC is expected to report an EPS of Rs 37 and Rs 45 in FY 2014 and FY2015. BUY with a Target Price of Rs 860
