TODAY WE PURCHASED SHARES OF HDFC BANK
Today I made a first entry into $HDB (HDFC Bank Ltd-ADR) shares in the portfolio.
As I usually do whenever I add a new company to the portfolio, let’s analyze together the reasons behind this purchase.
Let’s start with the company.
HDFC Bank is the largest private bank in India by market capitalization and is now one of the largest banks in the world. After the merger with HDFC Ltd., it has firmly positioned itself among the major global banking institutions by market value, with a capitalization that places it among the leading banks worldwide.
The bank is headquartered in Mumbai and was founded in 1994. Over time it has grown to serve more than one hundred million customers through thousands of branches spread across the country.
Its business model is relatively simple to understand.
The bank collects deposits through current and savings accounts and uses those funds to provide loans to households and businesses. Its main products include mortgages, personal loans, auto loans, credit cards, and banking services for companies.
The core of the business is strongly domestic. A significant portion of its revenue comes from Indian customers’ current accounts and deposits, as well as from loans provided to the domestic economy.
This aspect is one of the main reasons behind the investment.
Buying HDFC Bank allows me to gain direct exposure to the Indian economy, one of the fastest-growing major economies in the world.
At the same time, since the business is strongly linked to India’s internal growth, it adds to the portfolio an exposure that is less correlated with many global companies tied to technology or artificial intelligence.
Let’s now look at a few financial indicators to better understand the quality of the business.
One of the most commonly used metrics when analyzing a bank is Return on Equity (ROE), which measures the return the bank generates on shareholders’ capital. In the case of HDFC Bank, ROE is around 14–15%, a level generally considered solid for the banking sector.
Another important indicator is credit quality. The ratio of non-performing loans to total loans is around 1–1.3%, a relatively low figure that reflects prudent risk management.
In simple terms, this means that only a small portion of the loans granted by the bank becomes problematic, which is a key factor for the stability of a financial institution.
From a portfolio perspective, this investment adds three interesting elements:
– exposure to one of the most dynamic economies in the world
– a banking business linked to the domestic growth of India
– diversification compared with many global companies more exposed to the technology cycle
Regarding position management, today I made an initial entry of about $2,500.
As always, I never consider a purchase as a single operation. I have already identified additional entry levels in case the price declines further, allowing me to build the position over time.
The goal is not to guess the perfect price, but to gradually build exposure to companies that I consider attractive for the long term.
Have a great day everyone
@LucaMulargiu... Show More
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