HDFC was incorporated in 1977 with the primary objective of meeting a social need - that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership.

Housing Development Finance Corporation Ltd (HDFC), country’s premier housing finance company with a market share of over 45 per cent, has emerged as a multi-product financial conglomerate with banking, insurance, asset management, securities and real estates services added on to its core business of housing finance. However, HDFC is not in favor of merging all its businesses under a single roof, a different stand from that being adopted by its peers in the industry.

Products & Services—

HDFC, is known for its strong retail focus and serving the middle-class. It has assisted over 22 lakh families own a home through loans of over Rs 40,000 crore. The company has a strong distribution network of over 116 offices across the country, serving customers in over 2,400 cities/towns. HDFC offers a range of loan products including housing loan, home improvement loan, home extension loan, home equity loan and land purchase loan, among others.

HDFC is India's No. 1 housing finance company. After venturing successfully into commercial banking, the company has set its sight on dominating the InfoTech, mutual fund and insurance areas. The company has recently entered in to an agreement with its associate bank, HDFC Bank in order to retail its products from the bank's branch network. This will go a long way in further extending the reach of HDFC across the country.

HDFC’s borrowing costs in the current year have moved up. Average weighted current cost of borrowings is about 6.2% and with lending rates now at about 8%, spreads are a healthy 1.8%. These spreads are lower than the current portfolio spreads of about 2%. However, with average duration of the portfolio over 5 years, the lower incremental spreads will only gradually flow through to the portfolio.
 
Valuations
 
At current market price stock is trading at 34.5 P/E multiple of its FY 2010 estimated earnings. We recommend investors to Buy “HDFC” at every correction for medium to long term investment horizon.