The Hindu Business Line : HDFC: Book profits partially

THE stock of HDFC has run up sharply in the last few months. The stock is now trading at a multiple of nearly 16 times its earnings for the 12-month period ended June 2003. The valuation commanded by HDFC is one of the highest in the banking industry. A bank such as State Bank of India in contrast trades at a multiple of 7 times its earnings. Given the financial profile of HDFC such as low incidence of non-performing assets, expanding spreads and the prospects for the housing finance industry, a premium over other stocks in the banking industry is justified. However, the large premium at which the stock now trades suggests that returns from the present levels in future will be low. In this context, investors can consider booking profits partially now and reduce the proportion of HDFC in the portfolio.

BL Research Bureau

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