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Hdfc bank: Camels analysis and discounted cash flow valuation Case Solution & Answer

Hdfc bank: Camels analysis and discounted cash flow valuation Case Study Solution

Introduction

The incorporation of HDFC bank was with a registered office in 1994 in Mumbai. HDFC was the first bank who received an “in principle” RDI approval to initiate the services as a private bank. The bank was initially set up as a part of liberalization program of the banking industry in India, and it started its banking operations as a scheduled commercial bank. This significantly led to the extension of core values of HDFC Bank regarding sustainability, people, product leadership, customer focus and operational excellence. By the year2018; the bank operated nearly around 4787 branches in around 2691 cities across the world.

All the branches were centrally associated with one another through real-time basis, providing a reflection on the satisfaction of customers representing the bank’s performance. The NPAs to net advances is relatively lower as compared to its competitors i.e. around 0.4 percent. The bank was also provided with a diversification advantage, which was not limited to retail banking. The key interest areas of the bank mainly included wholesale banking, treasury and other bank related services. Such sectors contributed to 49.91 percent in the total revenue, followed by the profit contribution of around 62.64 percent. (Gupta, 2020)

Problem Statement

For the determination of long-term investment opportunity in the banking sector of India; two analysts narrowed down their analysis to HDFC Bank Ltd. This represented the requirement for stock valuation and determination of intrinsic price of the bank. The stock valuation and estimation of intrinsic value were primarily based on the identification of banking stock, for making strong tendency oflong-term investment for the equity portfolio of pension fund……………………………….

 

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