-Over the past three months HDFC Ltd is down 12% underperforming its listed subsidiaries and associates – HDFC Bank (+2%), HDFC Life (+21%) and HDFC AMC (+35%).

- Investor concerns have been potential Net Interest Margin pressure due to competition for retail mortgages, higher NPA in wholesale loans and slower growth.

- Competition for retail loans is rational for now. But any decrease in retail yields can be offset by higher share of wholesale loans and lower funding costs.

-There is enough P&L cushion via stake sale in Gruh which can be used for making NPA provisions.

-The core mortgage business now trades at 1.7x FY21E P/Adj. B which is very attractive

HDFC is best-in-class mortgage company, and the Quarter 2 FY20 results should clarify concerns around NIMs and lower funding costs.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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