Macquarie hosted a call for investors with Sashidhar Jagdishan, MD & CEO, and Srinivasan Vaidyanathan, CFO of HDFC bank. Key takeaway: Bank is on track on the deliverables promised to the RBI. Covid second wave would have some impact on the restructured assets as well as on the customers who had taken moratorium last time however the impact will be range-bound.

Macquarie says would encourage investors to add HDFC stock at current levels and the stock is one of the top pick in the financial space. The stock at 2.8x FY23E P/BV is trading at a ~15-20% discount to its historical averages. Technology-related issues are a blip in the overall functioning of the bank and the bank continues to be on a strong footing to capture market share & deliver high profitability.

• Highlights of investor meet with HDFC Bank management on Covid wave:

1. Near-term delinquencies to increase but overall losses to be contained due to covid 2nd wave.
2. April 2021 cheque bounce rates had gone up, in May 2021 the bounce rates have normalised.
3. Impact on supply chain not as much as in the first wave.
4. The second wave has impacted rural areas more.
5. SME and corporate book holding up; expect higher delinquencies in retail book.
6. Expect delinquencies in recast book & book that had taken moratorium last time.
7. Management believes that NPLs will be just a timing issue and eventual losses will be low.

• ON TECH ISSUES

1. Working on war footing to improve the overall technology, recovery systems, and user experience.
2. The audit report has been submitted to RBI, awaiting approval from RBI.
3. On track to implement deliverables post outage in Dec 2020 and RBI restrictions.
4. Working on improving the user interface with payzap/smart-buy platforms will be relaunching them.
5. Ensuring that systems can be decoupled.
6. Building resilience to ensure that recovery is faster even if there is an outage.
7. Confident that inability to launch credit cards will not impact profits.
8. Already migrating applications to a cloud-based architecture.
9. Already moved to a new data centre during the pandemic.

• COMPETITION FROM FINTECHS AND BUY NOW, PAY LATER COMPANIES

The bank believes that partnerships are the key for holding their forte and they already have tied up and are tying up more with newer players to offer their products.

The main purpose of the change was to bring those who are second in the hierarchy in the management line to the fore and give them leadership responsibilities. This also encourages the pyramid below to work and contribute better as they will have a clear well-defined career path/plan in the organisation.