Street’s rejoicing HDFC Bank’s Q2 results, but Deepak Shenoy has a different story to tell

On Monday, HDFC Bank released its September quarter results, which showed a 51% year-on-year (YoY) growth in the net profit of the merged entity.

The Rs 16,811 crore consolidated profit figure was a pleasant surprise for Dalal Street, as it was way above analysts’ expectations.

This stellar rise in the bottomline was driven by a strong net interest income growth and lower provisions even as asset quality saw some deterioration.


However, market veteran Deepak Shenoy’s analysis of HDFC Bank’s results had a different picture to show.

Here’s how he decoded the numbers:
According to Shenoy, HDFC Bank’s numbers don’t include the impact of the parent HDFC Ltd’s merger from the previous year.

HDFC had only one associate company last year, which was HDFC Bank.

Therefore, the consolidated numbers of HDFC will include the revenue of all the subsidiaries as well as the percentage of profits from associates. Then, HDFC held around 24% stake in HDFC Bank.

In the September quarter of last year, the combined net profit of HDFC and HDFC Bank was Rs 18,205 crore. If we exclude the associate profit of Rs 2,954 crore, then the combined net profit comes to Rs 15,251 crore for the September quarter of last year.

Taking Rs 15,251 crore profit as the base figure of last year, the YoY growth in the net profit comes to just a little over 10%.

This growth, in Shenoy’s words, “sucks”, because HDFC Bank used to easily deliver 15% or more growth.

“..You have to know the true picture. This headline of "HDFC Bank shows 50% growth in profit" is very uninformed. It's 10%,” he tweeted.

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