And what do we get after we do some number crunching? In the fiscal year ending March 2005, net sales of ICICI Bank were a little more than three times the net sales of HDFC. By March 2009, the difference in net sales was still three times. So you could say that the growth engine being run by Kamath in the form of ICICI had continued to outpace the more solid pace maintained by HDFC under Parekh. But wait. Between March 2008 and March 2009, growth in net sales for ICICI was virtually zero. In the same period, net sales at HDFC grew by more than 20%. In the fiscal year ended March 2005, profit after tax at ICICI was about 18% of net sales while it was about 30% for HDFC. By March end 2009, the balance sheets of both the entities were adversely affected by the meltdown. Profit after tax at HDFC was down by a little more than 20%; at ICICI, it had plummeted by about 12%. Not surprisingly, the markets also seem to think that HDFC is a better bet at the moment. The PE ratio of HDFC is hovering around 19 while that for ICICI is considerably lower at about 10. The market cap to sales ratio at HDFC is a respectable 3.5 while it is less than one in the case of ICICI. The real reasons for this current thumbs down to ICICI are easy to discern. In the fiscal year ended March 2005, ICICI delivered a return on net worth of about 14.5% while HDFC delivered a little more than 30%. After the meltdown, by end March 2009, the figure for HDFC was 18.2% while that for ICICI had crashed to about 7.8%.
In early 2008, when it appeared to most that the bubble will never burst, Business & Economy did a cover story with a headline “Aggression pays; Aggression Slays”. One of the case studies was an analysis of how far ICICI could go with its aggressive growth strategy. Now we know. Says Ashok Jainani, Vice President, Research & Market Strategy at Khandwala Securities, “ICICI has been more aggressive and tried to adopt the banking culture prevailing in large foreign banks. Perhaps that is why ICICI is now reversing some of its strategies. Under Chanda Kochhar, they are trying to consolidate themselves, moving out of the exaggerated aggressiveness that they showed over the last few years.”
In early 2008, when it appeared to most that the bubble will never burst, Business & Economy did a cover story with a headline “Aggression pays; Aggression Slays”. One of the case studies was an analysis of how far ICICI could go with its aggressive growth strategy. Now we know. Says Ashok Jainani, Vice President, Research & Market Strategy at Khandwala Securities, “ICICI has been more aggressive and tried to adopt the banking culture prevailing in large foreign banks. Perhaps that is why ICICI is now reversing some of its strategies. Under Chanda Kochhar, they are trying to consolidate themselves, moving out of the exaggerated aggressiveness that they showed over the last few years.”
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