AdiTya Puri has a healthy disregard for consultants. “They come to your office, take all the information from your employees and then play it back to you in a PowerPoint presentation,” the MD and CEO once remarked. He may have said this in jest but HDFC Bank is testimony to the fact that one doesn’t need a degree from Stanford or Harvard or for that matter an IIM to run a company successfully.
Indeed, Puri seems to have banked on little else but common sense. And some tremendous leadership skills. The result is that few companies in India have achieved what HDFC Bank has. Anyone who invested R10,000 in the IPO 21 years ago would have made R63 lakh. And R2.5 lakh worth of dividends to boot. If that isn’t startling enough, HDFC Bank’s market capitalisation has grown 333 times to $46. 7 billion between May 1995, when it listed, and now; in that time, Citibank’s market cap has risen just five times to $136.8 billion.
Even Puri must not have imagined when he set out in September1994 that he’d build a bank of this stature. To be sure, there was a big opportunity — India was seriously under-banked. But there were several well-entrenched incumbents with large networks. Also, sometimes too much choice can hurt rather than help. And that’s where Puri’s strategy — essentially, to stay with the retail segment rather than chase large corporates or stray into spaces like infrastructure — paid off.
Incidentally, the lender couldn’t for a long time offer home loans, the most retail attractive product in the market.
Nevertheless, HDFC Bank managed to both grow and diversify its assets — today 49% of the book comprises wholesale loans and a fourth of the business comes from semi-urban and rural areas. But there are no blemishes on the balance sheet — the lender has always boasted the cleanest book in the business and non-performing assets have rarely crossed 1%. It’s the most amazingly judicious use of capital.
Puri’s bigger achievement would have to be the large liability franchise the bank has built in the face of competition from public sector banks that have always had better reach. Interestingly, half the bank’s branch network today is in semi-urban and rural areas. Its strong CASA base has allowed it to continuously earn enviable margins of 4% or more. And it speaks volumes for the strength of the balance sheet that the merger of Centurion Bank of Punjab — not the most robust of lenders — was digested without too much pain.
Of course, HDFC Bank started with a clean slate; it didn’t have any legacy issues that some other lenders in the private sector did. But, all things considered, the legacy that Puri will leave behind will be a rich one.