1.

INTRODUCTION TO THE COMPANY

HDFC Bank Limited (HDFC Bank or the Bank) was incorporated in August 1994
in the name of HDFC Bank Limited, with its registered office in Mumbai, India and
commenced operations as a Scheduled Commercial Bank in January 1995. HDFC Bank
along with its subsidiaries (HDFC Securities Limited and HDB Financial Services
Limited) is engaged in providing a wide range of banking and financial services in retail
banking, wholesale banking and treasury operations.
Over the last ten years, HDFC Bank has grown at a compounded annual growth rate of
29.55% and has emerged as a market leader across multiple products.
For FY 2016, HDFC Banks net interest margins stood at a healthy 4.3 %. Approx. 30%
of its operating revenue came from non-funded segments such as fees and commissions
for services. For the same period, net NPAs stood at 0.30 % far below the industry
average for private banks. 43.0% of total deposits were in the form of low cost CASA
deposits as on March 31, 2015.
As of June 30, 2016, HDFC Banks customer base was over 26 million and its
distribution network was at 4,541 branches and 12,013 ATMs in 2,587 cities/towns.
55% of the total branches are now in semi-urban and rural areas.
BUSINESS FOCUS

HDFC Bank deals with three key business segments. - Wholesale Banking Services,
Retail Banking Services, Treasury. It has entered the banking consortia of over 50
corporate for providing working capital finance, trade services, corporate finance, and
merchant banking. It is also providing sophisticated product structures in areas of
foreign exchange and derivatives, money markets and debt trading And Equity
research.

Wholesale banking services

Blue-chip manufacturing companies in the Indian corp to small & mid-sized corporates
and agri-based businesses. For these customers, the Bank provides a wide range of
1

commercial and transactional banking services, including working capital finance, trade
services, transactional services, cash management, etc. The bank is also a leading
provider of the above services to its corporate customers, mutual funds, stock exchange
members and banks.

Retail banking services

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (Visa Electron) and issues the MasterCard Maestro debit card as
well. The Bank launched its credit card business in late 2001.

2. VISION, MISSION & CORE VALUES

VISION
HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic team
determined to accomplish the vision of becoming a world-class Indian bank.

MISSION
HDFC mission is to be World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology,
service levels, risk management and audit & compliance. The objective is to build
sound customer franchises across distinct businesses so as to be a preferred provider of
banking services for target retail and wholesale customer segments, and to achieve a
healthy growth in profitability, consistent with the Bank's risk appetite. They are
committed to do this while ensuring the highest levels of ethical standards, professional
integrity, corporate governance and regulatory compliance.
ANALYSIS

PARAMETER

HDFC BANK

Markets

YES

Technology

YES

Survival growth and profit

YES

Philosophy

YES

Self- concept

YES

Public image

NO

Employees

YES
3

Customers

YES

Products Services

YES

Increase the market share in Indias expanding banking and financial services
industry by following a disciplined growth strategy focusing on quality and not
on quantity and delivering high quality customer service.
Leverage the technology platform and open scalable systems to deliver more
products to more customers and to control operating costs.
Maintain the current high standards for asset quality through disciplined credit
risk management.
Develop innovative products and services that attract the targeted customers and
address inefficiencies in the Indian financial sector.
Continue to develop products and services that reduce the cost of funds.

Focus on high earnings growth with low volatility

3. ENVIRONMENTAL ANALYSIS
Business environment includes set of conditions or situation that affects business
activities or decision making. These conditions are broadly classified into internal
environment and external environment.

3.1 THE EXTERNAL ENVIRONMENT ANALYSIS

External environment include factors which are outside the control of the business
organization but it provide opportunities or pose threats. External environment is
further classified into two categories micro environment and macro environment.

1. Political Factors
Government and RBI policies affect the banking sector. Sometimes looking into the
political advantage of a particular party, the Government declares some measures to
their benefits like waiver of short-term agricultural loans, to attract the farmers votes.
By doing so the profits of the bank get affected. Also, financial inclusion schemes like
Jan Dhan Yojna affects the profits of the banks.

2. Economic Factors
Cash Reserve Ratio (CRR) reduced by 0.25% to 4.5% of net demand and time
liabilities (NDTL) to potentially inject primary liquidity of Rs. 170 billion; token
reduction in lending rates expected, given comfortable liquidity position and the recent
revisions in deposit rates and lending rates for certain products undertaken by some
Banks.
Benchmark Repo rate maintained at 8.0%; Reverse Repo and Marginal Standing
Facility (MSF) stand unchanged at 7.0% and 9.0%, respectively. Bank Rate also
maintained at 9.0%.
5

3. Social Factors

HDFC announced its plans to make an entry into education sector. The group plans to
focus on small towns wherein it would either set up schools or take over weak
performing boarding schools. HDFC will foray into this sector through a separate
subsidiary. It is widely believed that many schools are planning to set up model, which
is profitable and scalable, as operating under trusts makes it difficult to segregate
profits. As a result, HDFC could look to adopt those schools that are open to the
takeover model. HDFC already has an educational loan unit Credila Financial
Services in which it owns 62.3% stake. Credila plans to boosts the distribution
network and customer base of HDFC Bank in order to expand and also lower the cost
of funds. The groups likely entry into education sector could be beneficial in the long
run.

HDFC Bank, is partnering with the citys municipal authorities to educate people about
the danger posed by plastic bags to the environment, and to offer recycle paper bags
instead. The bank reinforced the Kolkata Municipal Corporation (KMC) initiated antiplastic awareness drive by distributing recycled and eco-friendly paper bags to retailers
and customers across nine markets in the city. Encourage citizens to use environment
friendly and cost effective paper bags as the best substitute.

4. Technological Factors

HDFC bank has 12,013 ATMs in 2,587 cities/towns. Also, it provides one of the best
internet banking services in the industry. It is also a leading bank in finding the use of
robots in banking industry. Smartcards or debit cards to be used for making payments.
These are also called as electronic purse
Today banks are also using SMS and Internet as major tool of promotions and giving great
utility to its customers. For example SMS functions through simple text messages sent from
your mobile.
CORE BANKING SOLUTIONS -It is the buzzword today and every bank is trying to
adopt it is the centralize banking platform through which a bank can control its entire
6

operation the adoption of core banking solution will help bank to roll out new product and
services.

3.2 THE INTERNAL ENVIRONMENT ANALYSIS

Internal environment consists of factors which are within the control of the
organization. Business ethics, Objective of the firm, Value system, Management
structure, Physical assets, Technological resources, financial resources, Stakeholders,
Human resources etc. are part of the internal environment of business.

1. VISION AND MISSION

VISION
HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic team
determined to accomplish the vision of becoming a world-class Indian bank.
MISSION
HDFC mission is to be World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology,
service levels, risk management and audit & compliance. The objective is to build
sound customer franchises across distinct businesses so as to be a preferred provider of
banking services for target retail and wholesale customer segments, and to achieve a
healthy growth in profitability, consistent with the Bank's risk appetite. They are
committed to do this while ensuring the highest levels of ethical standards, professional
integrity, corporate governance and regulatory compliance.
Business strategy emphasizes the following :
Increase the market share in Indias expanding banking and financial
services industry by following a disciplined growth strategy focusing on
quality and not on quantity and delivering high quality customer service.
Leverage the technology platform and open scalable systems to deliver more
products to more customers and to control operating costs.
7

 Maintain the current high standards for asset quality through disciplined
credit management.
Develop innovative products and services that attract the targeted customers and
address inefficiencies in the Indian financial sector.
Continue to develop products and services that reduce the cost of funds.

Focus on high earnings growth with low volatility.

2. Long Term Objective

HDFC Banks mission is to be a World Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth
in profitability, consistent with the banks risk appetite. The bank is committed to maintain
the highest level of ethical standards, professional integrity, corporate governance and
regulatory compliance. HDFC Banks business philosophy is based on four core values:
Operational Excellence, Customer Focus, Product Leadership and People.

3. Leadership
Key executive for HDFC bank
Name

Board Relationships

Title

Aditya Puri

15 Relationships

Managing Director, Director, Member of Investors

Grievance (Share) Committee, Member of Credit Approval
Committee, Member of Risk Policy & Monitoring
Committee, Member of Fraud Monitoring Committee,
Member of Premises Committee and Member of Customer
Service Committee

Sashi Jagdishan

No Relationships

Head of Finance

Bhavesh Zaveri

46 Relationships

Head of Operations, Head of Wholesale Banking

Operations and Head of Cash Management

Sunil Shah B.com Mba

15 Relationships

Managing Director of HDFC Securities Limited and

Director of HDFC Securities Limited

Abhay Aima

5 Relationships

Head of Equities & Private Banking - Third Party Products

& NRI Banking

4. FINANCIAL RATIOS
Mar16

Mar15

Mar14

Mar13

Profitability Ratios
Net Profit Margin

20.41

21.07

20.61

19.18

Return on Long Term Fund

70.54

66.77

81.47

80.09

Return on Assets

287.47

247.39

181.23

152.20

Interest Income / Total Funds

9.27

8.96

9.22

9.50

Operating Expense / Total Funds

2.50

2.46

2.55

2.87

Net Profit / Total Funds

1.89

1.89

1.90

1.82

Total Income / Capital Employed

10.92

10.62

11.00

11.36

Asset Turnover Ratio

0.10

0.10

0.10

0.11

Total Debt to Owners Fund

8.25

8.00

9.36

9.09

Investment Deposit Ratio

33.13

35.13

35.05

38.51

Current Ratio

1.68

1.69

1.66

1.63

Quick Ratio

1.40

1.42

1.40

1.38

Management Efficiency Ratios

Debt Coverage Ratios

Leverage Ratios

4. SWOT ANALYSIS OF HDFC BANK

Strengths

1. HDFC Bank is the second largest private bank in India as measured by assets. It
is the largest bank in India by market capitalization as of February 2016.
2. HDFC bank is located in 2,587 cities in India and has more than 4540 branches to
serve customers.
3. The banks ATM card is compatible with all domestic and international
Visa/Master card, Visa Electron/ Maestro, Plus/cirus and American Express. This is
one reason for HDFC cards to be the most preferred card for shopping and online
transactions
4. HDFC bank has the high degree of customer satisfaction when compared to other
private banks
5. The attrition rate in HDFC is low and it is one of the best places to work in
private banking sector
6. HDFC has lots of awards and recognition, it has received Best Bank award from
various financial rating institutions like Dun and Bradstreet, Financial express, Euro
money awards for excellence, Finance Asia country awards etc
7. HDFC has good financial advisors in terms of guiding customers towards right
investments

Weakness

1. HDFC bank doesnt have strong presence in Rural areas, where as ICICI bank its
direct competitor is expanding in rural market
2. HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard
core loyals in terms of banking services.
10

3. HDFC lacks in aggressive marketing strategies like

ICICI. The bank focuses mostly on high end clients
4. Some of the banks product categories lack in performance and doesnt have
reach in the market
Opportunities

HDFC bank has better asset quality parameters over government banks, hence
the profit growth is likely to increase

The companies in large and SME are growing at very fast pace. HDFC has good
reputation in terms of maintaining corporate salary accounts

HDFC bank has improved its bad debts portfolio and the recovery of bad debts
are high when compared to government banks

HDFC has very good opportunities in abroad

Greater scope for acquisitions and strategic alliances due to strong financial
position

Threats

HDFCs nonperforming assets (NPA) increased from 0.18 % to 0.20%. Though

it is a slight variation its not a good sign for the financial health of the bank

The non banking financial companies and new age banks are increasing in India

The HDFC is not able to expand its market share as ICICI imposes major threat

The government banks are trying to modernize to compete with private banks

RBI has opened up to 74% for foreign banks to invest in Indian market

11

5. INDUSTRY ANALYSIS
Industry Structure (Using Porters five forces model)
PORTER'S FIVE FORCES MODEL
Porter's five forces analysis is a framework for industry analysis and business strategy
development formed by Michae l E. Porter of Harvard Business School in 1 979. It draws
upon industrial organization (IO) economics to derive five forces that determine the
competitive intensity and therefore attractiveness of a market. Attractiveness i n this context
refers to the overall industry profitability. An "unattractive" industry is one in which the
combination of these five forces acts to drive down overall profitability. A very unattractive
industry would be one approaching "pure competition", in which available profits for all
firms are driven to normal profit.
Three of Porter's five forces refer to competition from external sources. The remainder are
internal threats
They consist of those forces close to a company that affect its ability to serve its customers
and make a profit. A change in any of the forces normally requires a business unit to reassess the marketplace given the overall change in industry information.

12

INDUSTRY ANALYSIS OF HDFC BANK

FIVE FORCE

HIGH/ MEDIUM/ REMARK

LOW

Threat of new entrants

Low

For any new entrants permission

should be granted from RBI, and it is
not easy to have the permission. There
are many political and legal issues.
And the early investment is very
high.

Bargaining
customers

power

of Medium

Customer can switch to any other bank

very easily if service was not good
because switching cost is low. But
most of time customers are having their
account in most of the bank and they
know that every bank provide similarly
the same service.

Bargaining
suppliers

power

of Low

In bank industry there is no such

supplier.

Threat of substitutes

High

Because there are many public and

private bank. And also the post office
provide some of the services, many
private firm provide easy loan scheme
to attract the customers. People also
started investing their money instead of
saving them like stock market, mutual
funds , property etc.

Degree of rivalry

High

There are large numbers of public and

private bank and market growth rate
was also high. The switching cost was
also very low and the services provide
by all the bank was same.

13

6. COMPETITIVE PROFILE MATRIX (BASED ON KEY SUCCESS

FACTORS)
key

HDFC BANK

FACTORS WEIGHT

RATING

No. of
Branches
NPA

Business
per
Employee
SERVICES

ICICI BANK
WAS

SBI BANK

RATING

WAS RATING

WAS

.1

0.4

0.4

0.5

0.8

0.6

0.4

0.9

1.2

0.6

1.2

1.2

0.6

0.3

0.1

0.4

19

3.6

16

3.5

15

2.5

.2

.3
.3

Revenue

.1

Total score

1.0

average

3.8

3.2

3.0

Since average of HDFC bank is higher than SBI bank and ICICI bank thats means HDFC
bank is more preferred bank than any other bank. The reason behind this is HDFC bank have
low NPA ratio and service provided by the bank is also better than any other bank.

14

7. BCG MATRIX
The BCG matrix is a chart that had been created by Bruce Henderson for the Boston Consulting
Group in 1970 to help corporations with analysing their business units or product lines. This
helps the company allocate resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.

HDFC Bank
HDFC BANK stands at star position in BCG matrix. As HDFC bank have the high market
growth and they also have high market share. There is a lot of growth potential for the banking
industry because of increasing disposable income of customers, increasing working class, more
volatility in other markets also increasing importance of savings and already discussed almost
30% of the market is still untapped.

15

HDFC Insurances
In insurance sector HDFCs most of the products are in star position. HDFC insurance products
have high market share and high growth rate. So we have lot of opportunity for investment.
HDFC Mutual Funds
Mutual fund stands at cash cow. This shows that HDFC high market share and low market
growth rate in mutual funds. This means we should only focus on profitable products and try to
investment on those products which are low market growth rate but perform well if proper
investment is theirs.

16

8. SPACE MATRIX

FINANCIAL POSITION

RATING *

HDFC banks 3 years CAGR (Loans & Advances) is 23.21% vis--vis next +6
biggest competitor (18.30%)
HDFC banks 3 years CAGR (Total Deposit) is 22.25% vis--vis next +7
biggest competitor (13.57%)
HDFC banks net NPA (0.25%) vis--vis ICICI banks (1.61%)

+7

HDFC bankss Cost to Income ratio (.45) vis--vis ICICI banks (.37)

+4

HDFC banks ROA (1.73%) vis--vis industry average of 1.59%

+6

HDFC banks capital adequacy (16.79%) vis--vis Kotak Mahindra banks +5

(17.17%)
AVERAGE

+5.83

*Ratings - +7 for best and +1 for worst

INDUSTRY POSITION

RATINGS*

Highly regulated by RBI.

+2

Decreased competition due to license approval from RBI (ease of entry)

+6

Growth Potential

+6

Profit Potential

+5

Resource Utilization

+4

AVERAGE

+4.8

*Ratings - +7 for best and +1 for worst

17

STABILITY POSITION

RATING*

Political Stability

-1

Technological change

-4

Competitive Pressure

-4

Risk Involved

-3

Rate of Inflation

-5

Demand elasticity

-5

AVERAGE

-3.67

*Ratings - -1 for best and -7 for worst

COMPETITIVE POSITION

RATINGS*

Large customer base

-1

International banks are becoming increasingly competitive

-5

NPAs of public sector banks

-2

Product Quality

-3

Innovative Products

-2

Highest Capital Adequacy Ratios amongst all banks

-2

AVERAGE

-2.5

*Ratings - -1 for best and -7 for worst

18

FP

Conservative

Aggressive

7
6
5
4
3
X-axis 2.3
Y-axis 2.2

2
1
CP

-7

-6

-5

-4

-3

-2

-1

-1
-2
-3
-4
-5
-6
-7
Defensive

Competitive

SP

HDFC Bank should adopt Aggressive Strategy

It can consider the following steps:

Market penetration

Product development

Diversification

19

IP

9. CONCLUSION
Banking is also now being regarded as a versatile financial planning tool. Research indicates
that Indians have four basic financial needs during their life asset accumulation (such as
buying a house or car), protecting their family, securing their childrens education, and
provision for their retirement. India being a country having a huge population of around one
billion people with only 32% of the banking population in India possessing banking the
country has a vast potential, which has been left untapped till now.

With this prospect HDFC is continuously working in this direction, but there are several
competitors already in the market with the similar strategy. This project concludes that with
the changing economical and political scenario bank sector faces many ups and downs but in
order to maintain the position HDFC needs to follow some differentiating strategy. Because it
has a very fine line of difference with its competitor ICICI and can outshine HDFC.

The project has given the clear cut vision as to how to differentiate its strategy from other
competitors an how to use the strength and convert the weakness of others as an opportunity.

20

REFERENCES

1. www.moneycontrol.com
2. www.economictimes.com
3. www.hdfc.com
4. www.icici.com
5. www.sbi.in
6. www.10paisa.com

7. http://investing.businessweek.com/research/stocks/private/people.asp?privcapId=1016 77

8. http://www.marketing91.com/swot-analysis-hdfc/

9. http://www.rbi.org.in/scripts/ATMView.aspx

21