SECURITY ANALYSIS AND

PORTFOLIO MANAGEMENT
PROJECT
ON
HDFC BANK

SUBMITTED TO
MS. SANAM SHARMA

SUBMITTED BY
KANIKA GUPTA
MBA - III A
02214803911

HDFC BANK
COMPANY PROFILE
HDFC Bank Limited is an Indian financial company that was incorporated in August
1994. HDFC Bank is the fifth or sixth largest bank in India by assets and the second
largest bank by market capitalization as of February 24, 2012. The bank was promoted
by the Housing Development Finance Corporation, a premier housing finance company
(set up in 1977) of India. HDFC Bank has 1,986 branches and over 5,471 ATMs, in 996
cities in India, and all branches of the bank are linked on an online real-time basis. As of
30 September 2008 the bank had total assets of Rs.1006.82 billion. For the fiscal year
2010-11, the bank has reported net profit of 3,926.30 crore (US$710.66 million), up
33.1% from the previous fiscal. Total annual earnings of the bank increased by 20.37%
reaching at 24,263.4 crore (US$4.39 billion) in 2010-11. HDFC Bank is one of the Big
Four banks of India, along with: State Bank of India, ICICI Bank and Punjab National
Bank.

HISTORY
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation
Limited (HDFC), India's largest housing finance company. It was among the first
companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to
set up a bank in the private sector. The Bank started operations as a scheduled
commercial bank in January 1995 under the RBI's liberalization policies.
Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was merged
with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India.
Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of
Times Bank.
In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to
more than 1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000
crore and net advances of about Rs.89,000 crore. The balance sheet size of the
combined entity is more than Rs. 1,63,000 crore.

CAPITAL STRUCTURE
The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion). The paid-up capital
is Rs 424.6 crore (Rs.4.2 billion). The HDFC Group holds 19.4% of the bank's equity
and about17.6% of the equity is held by the ADS Depository (in respect of the bank's
American Depository Shares (ADS) Issue). Roughly 28% of the equity is held by
Foreign Institutional Investors (FIIs) and the bank has about 570,000 shareholders. The
shares are listed on the Stock Exchange, Mumbai and the National Stock Exchange.

The bank's American Depository Shares are listed on the New York Stock Exchange
(NYSE) under the symbol 'HDB'.

MANAGEMENT
Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th
July 2010. Mr. Vasudev has been a Director of the Bank since October 2006. A retired
IAS officer, Mr. Vasudev has had an illustrious career in the civil services and has held
several key positions in India and overseas, including Finance Secretary, Government
of India, Executive Director, World Bank and Government nominee on the Boards of
many companies in the financial sector.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25
years and before joining HDFC Bank in 1994 was heading Citibank's operations in
Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of
experience in public policy, administration, industry and commercial banking. Senior
executives representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head
various businesses and functions and report to the Managing Director. Given the
professional expertise of the management team and the overall focus on recruiting and
retaining the best talent in the industry, the bank believes that its people are a
significant competitive strength.

SHARE PRICES

DATE
01/07/2012
02/07/2012
03/07/2012
04/07/2012
05/07/2012
06/07/2012
09/07/2012
10/07/2012
11/07/2012
12/07/2012
13/07/2012
16/07/2012
17/07/2012
18/07/2012
19/07/2012
20/07/2012
23/07/2012
24/07/2012
25/07/2012
26/07/2012
27/07/2012
30/07/2012
31/07/2012
01/08/2012
02/08/2012
03/08/2012
06/08/2012
07/08/2012
08/08/2012
09/08/2012
10/08/2012
13/08/2012
14/08/2012
16/08/2012
17/08/2012
21/08/2012
22/08/2012

OPEN PRICE
553
565
574.75
575
579.5
582.6
581
575
588
588.45
582.3
587.25
584.1
583
587.1
589
580
570
574.9
578
577.9
586.25
589
585.15
585
582
593.55
602.1
601
600
600
600
605.1
607.55
602
595
596.5

HIGH PRICE
565
575
580.3
580.3
584.5
588.4
581.05
591
593.55
589.3
591.55
592.5
588.55
588.65
590.9
589
580
576.15
580.4
579
588
591.9
589.65
588.85
589.35
589
601.9
602.8
601.15
606.85
606.9
609.7
609
607.55
602
598.4
600.6

LOW PRICE
553
560.25
572
574.95
575.3
579.85
569.05
575
585.05
575.5
582.3
580.7
578.6
580.35
585.5
581.05
571.45
570
574.25
563
564.6
584
580
578.3
577.3
579.55
593
596.7
595.1
598.15
599.3
600
602.5
597.7
592.1
588.05
592

CLOSE PRICE
563.5
573.85
574.8
577.6
582.55
583.3
577.65
588.4
587.05
579.85
586.85
582.9
583
586.65
589.1
582.85
573.7
574.15
575.5
566.5
584.25
587.1
587.85
587
582.45
588.25
599.75
599.8
597.5
604.85
602.05
607.4
607.75
600.35
595.2
596.75
597.05

SENSEX (Market
Index)
17429.98
17398.98
17425.71
17462.81
17538.67
17521.12
17391.98
17618.35
17489.14
17232.55
17213.7
17103.31
17105.3
17185.01
17278.85
17158.44
16877.35
16918.08
16846.05
16639.82
16839.19
17143.68
17236.18
17257.38
17224.36
17197.93
17412.96
17601.78
17600.56
17560.87
17557.74
17633.45
17728.2
17657.21
17691.08
17885.26
17846.86

23/08/2012
24/08/2012
27/08/2012
28/08/2012
29/08/2012
30/08/2012
31/08/2012
03/09/2012
04/09/2012
05/09/2012
06/09/2012
07/09/2012
08/09/2012
10/09/2012
11/09/2012
12/09/2012
13/09/2012
14/09/2012
17/09/2012
18/09/2012
20/09/2012
21/09/2012

597.1
596
595
595
588
589.4
598.5
595
590.1
590
590.05
593
590
592.9
592
595
600
605
617
607.45
600
607

604.3
600.15
598.65
595
595.3
598.8
599.8
597.25
592.1
596
593.6
594.3
593.2
597
595.7
600
601.05
614.65
620
611.6
610
628

595.05
593.7
591.85
587
587
587.3
589.6
587.75
587.6
585.75
585.4
586.05
590
589.55
583.55
593.7
593.5
601.05
605.1
603.55
599.05
605.15

Valuation of equity share

Value of equity share =

EPS*P/E Ratio

23.31*26.82

625.4073

597.5
596.35
594.8
589.35
589.35
595.15
595.05
590.15
589.9
592
586.6
590.1
591.4
590.85
593.15
599.2
597.85
612.1
607.45
605.75
606.9
625.25

17850.22
17783.21
17678.81
17631.71
17490.81
17541.64
17429.56
17384.4
17440.87
17313.34
17346.27
17683.73
17749.65
17766.78
17852.95
18000.03
18021.16
18464.27
18542.31
18496.01
18349.25
18752.83

Closing price of HDFC Bank

Closing price

630
620
610
600
590
580
570
560
550
540
530

The closing price of the bank rose from Rs. 563.50 to Rs.625.25 in just 2 months. The bank also
touched the highest price of Rs. 628 which shows the growth of this share is very good as the
share price grew up so much in such a short period. So, investors should hold their shares or sell
them off.

Computation of BETA (risk)

M
-0.1779
0.1536
0.2129
0.4344
-0.1001
-0.7371
1.3016
-0.7334
-1.4671
-0.1094
-0.6413
0.0116
0.4660
0.5461
-0.6969
-1.6382
0.2413
-0.4258
-1.2242
1.1981
1.8082
0.5396
0.1230
-0.1913
-0.1534
1.2503
1.0844
-0.0069
-0.2255
-0.0178
0.4312
0.5373
-0.4004
0.1918
1.0976
-0.2147

S
1.8367
0.1655
0.4871
0.8570
0.1287
-0.9686
1.8610
-0.2294
-1.2265
1.2072
-0.6731
0.0172
0.6261
0.4176
-1.0609
-1.5699
0.0784
0.2351
-1.5639
3.1333
0.4878
0.1277
-0.1446
-0.7751
0.9958
1.9550
0.0083
-0.3835
1.2301
-0.4629
0.8886
0.0576
-1.2176
-0.8578
0.2604
0.0503

M- Mean of
M
-0.3074
0.0241
0.0834
0.3049
-0.2296
-0.8666
1.1720
-0.8629
-1.5967
-0.2389
-0.7708
-0.1179
0.3365
0.4165
-0.8264
-1.7677
0.1118
-0.5553
-1.3537
1.0686
1.6787
0.4100
-0.0065
-0.3209
-0.2830
1.1208
0.9548
-0.1365
-0.3550
-0.1474
0.3017
0.4078
-0.5300
0.0623
0.9681
-0.3442

(M- Mean of
M)2
0.0945
0.0006
0.0069
0.0929
0.0527
0.7510
1.3737
0.7446
2.5494
0.0571
0.5942
0.0139
0.1132
0.1735
0.6830
3.1249
0.0125
0.3084
1.8326
1.1419
2.8180
0.1681
0.0000
0.1030
0.0801
1.2561
0.9117
0.0186
0.1261
0.0217
0.0910
0.1663
0.2809
0.0039
0.9372
0.1185

S-Mean of S
1.6523
-0.0189
0.3027
0.6726
-0.0557
-1.1530
1.6766
-0.4139
-1.4109
1.0228
-0.8575
-0.1673
0.4417
0.2332
-1.2454
-1.7543
-0.1060
0.0507
-1.7483
2.9489
0.3034
-0.0567
-0.3290
-0.9595
0.8114
1.7705
-0.1761
-0.5679
1.0457
-0.6473
0.7042
-0.1268
-1.4020
-1.0423
0.0760
-0.1341

(M-Mean of M)x
(S-Mean of S)
-0.5079
-0.0005
0.0252
0.2050
0.0128
0.9992
1.9650
0.3571
2.2527
-0.2444
0.6610
0.0197
0.1486
0.0971
1.0292
3.1011
-0.0118
-0.0282
2.3667
3.1512
0.5093
-0.0232
0.0022
0.3079
-0.2296
1.9844
-0.1681
0.0775
-0.3713
0.0954
0.2124
-0.0517
0.7430
-0.0649
0.0736
0.0462

0.0188
-0.3754
-0.5871
-0.2664
-0.7991
0.2906
-0.6389
-0.2591
0.3248
-0.7312
0.1902
1.9454
0.3728
0.0965
0.4850
0.8238
0.1174
2.4588
0.4227
-0.2497
-0.7935
2.1994
7.5136

0.0754
-0.1925
-0.2599
-0.9163
0.0000
0.9841
-0.0168
-0.8235
-0.0424
0.3560
-0.9122
0.5967
0.2203
-0.0930
0.3893
1.0200
-0.2253
2.3835
-0.7597
-0.2799
0.1898
3.0236
10.6963

-0.1107
-0.5049
-0.7166
-0.3960
-0.9287
0.1611
-0.7685
-0.3886
0.1953
-0.8608
0.0607
1.8159
0.2432
-0.0330
0.3555
0.6943
-0.0122
2.3293
0.2931
-0.3792
-0.9230
2.0699

0.0123
0.2550
0.5135
0.1568
0.8624
0.0259
0.5906
0.1510
0.0381
0.7409
0.0037
3.2974
0.0592
0.0011
0.1264
0.4820
0.0001
5.4256
0.0859
0.1438
0.8520
4.2844
38.9309

Where M= Current Market Index- Previous Market Index

Previous Market Index
& S= Current Share Price- Previous Share Price
Previous Share Price
Mean of S
Mean of M

Variance of market
index

Covariance(S,M)

=
=
=
=

10.6963/58
0.1844
7.5136/58
0.1295

=
=

38.9309/58
0.6712

=
=

32.6044/58
0.5621

-0.1090
-0.3769
-0.4443
-1.1007
-0.1844
0.7997
-0.2012
-1.0079
-0.2268
0.1716
-1.0966
0.4122
0.0359
-0.2774
0.2049
0.8356
-0.4097
2.1991
-0.9441
-0.4643
0.0054
2.8391

0.0121
0.1903
0.3184
0.4358
0.1713
0.1288
0.1546
0.3917
-0.0443
-0.1477
-0.0665
0.7486
0.0087
0.0092
0.0728
0.5801
0.0050
5.1224
-0.2767
0.1761
-0.0050
5.8767
32.6044

16/09/2012

09/09/2012

02/09/2012

26/08/2012

19/08/2012

12/08/2012

05/08/2012

29/07/2012

=
=

22/07/2012

15/07/2012

08/07/2012

01/07/2012

Beta
0.5621/0.6712
0.84

Candlestick chart

640

620

Opening
price

600

High Price

580

560

Low Price

540

Closing
Price

520

500