The Unlisted market in India has gained immense popularity, which has provided investors with a chance to leverage the popularity of a brand before it reaches the list of companies. It has been estimated that the Indian unlisted market is currently worth more than 2 lakh crore, where investors are keen to join the growth of successfully run and profitable firms.
One of them is HDFC Securities Limited, which is one of the most trusted financial services intermediaries with an impressive financial growth induced by its parentage in HDFC Bank. By FY2024, it reported 26,607 million in revenues and 9,512 million in net income. Its market capitalisation in the unlisted market is 168000 million, and investors have created a good return from investing in this security services company.
Company Profile
HDFC Securities Limited is a leading stock market and financial services firm based in India and it was founded by the firm in the year 2000. HDFC Securities was first a joint venture company between HDFC Bank Limited, HDFC Limited, and Indocean eSecurities Holdings Limited, currently a full subsidiary of HDFC Bank. Based out of Mumbai, it has its presence in key cities of the country and serves both retail as well as institutional customers.
With its operations spanning more than 20 years, HDFC Securities has established its platform in providing a wide variety of services, such as trading in equities, mutual funds distribution, trading derivatives and other wealth management products. The fact that it has an already established brand name, technologies, and affiliation with HDFC Bank has earned it a strategic niche in the competitive broking and financial services industry in India.
C) Recent Financial Performance Of HDFC Securities
Revenue Growth
An increment in its revenue of over threefold in the six years between FY2018 and FY2024, i.e., 8001 million in FY2018 and 26607 million by FY2024, indicates a high compound annual growth rate (CAGR) of approximately 22.4%.
Profitability Trends
The net profit (PAT) has grown continuously and at a steady pace, with the company generating 3447 million in FY2018 to 9512 million in FY2024, as the company has ensured sustainable earnings growth.
Return Metrics
- Return on Equity (ROE): Percentage Year 2024 46.9%
- The Return on Total Assets (ROA): 6.7 per cent in FY2024. These are indicators of high efficiency of the deployment of shareholder capital and good operations.
- Capital Structure: Although the leverage is high with a 5.9x debt to equity, HDFC Securities is managed fairly due to good cash flows and the grassroots support of the HDFC Bank.
HDFC Securities earns luxury pricing in the unlisted space. The current P/E multiple of 18.5x indicates confidence in the investors that it has a good growth promise and that it can also survive the test of time amid swings in financial markets.
Cash Flow Analysis
In FY2024, the company experienced a strong net cash flow of 4,060 million due to vigorous financing activities of 29,459 million that compensated for the adverse inflow of cash operations. Throughout FY 2024, HDFC Securities has a steady liquidity position, offering cash and cash equivalents of 7,981 million as at 31 March 2024, although operating cash flows were volatile in some instances.
Dividend Payout
One of its outstanding attributes is that it has a high dividend policy. FY2024 dividend per share is also high compared to the current market price and is a 4.2 per cent dividend yield, which is again quite attractive to investors in the unlisted space with an income-seeking profile.
Earning Per Share (EPS)
The EPS has had an increasing trend since it was ranked at 223.0 in FY2018 to 597.4 in FY2024, one of the evidence of the company’s capabilities of creating shareholder value each passing year.
D) Conclusion
HDFC Securities demonstrates the potential of the Indian unlisted market. This is through more than 20 years of successful history, good parentage and financial measurement, the company has achieved a dominant market in the Indian financial services sector. Its high ROE and growing revenues with good dividends make it a very good investment choice for people who desire to be a part of the changing financial services domain.
As investors who are keen in putting their money in the growth story of HDFC securities and acquire the position of having a stake in a company providing financial services at the top of the industry, investing in HDFC Securities can be a good opportunity.