Post by Owais Ahmed

Everyone knows where HDFC Bank is winning. I wanted to find where AU Small Finance Bank is winning. Because that's usually where the real insight is. Week 7 of my #100DaysWithTVS challenge. When comparing companies, it's easy to conclude that the bigger company is better. HDFC Bank has a larger balance sheet. A larger deposit base. A larger branch network. A larger market capitalization. But that's not the interesting question. The interesting question is: Where is AU outperforming HDFC Bank? The first thing that stood out was Net Interest Margin. HDFC Bank's NIM is around 3.4-3.5%. AU Small Finance Bank operates at roughly 5.8-6%. That's a huge gap. For every rupee deployed, AU earns significantly more interest spread. The second thing that caught my attention was growth. HDFC Bank is already managing deposits and loans worth over ₹25 lakh crore. At that size, even growing 15% is a massive achievement. AU, on the other hand, is still much earlier in its journey. Its smaller base gives it a longer runway to compound deposits, loans and earnings. Then I looked at valuation. This was surprising. Despite growing faster and generating higher NIMs, AU often trades at valuation multiples that are not dramatically different from larger private sector banks. Which suggests the market is still debating how durable its growth can be. And honestly, that's where the entire investment debate sits. Nobody doubts HDFC Bank can survive. The question is how fast it can grow. Nobody doubts AU can grow. The question is whether it can maintain quality while doing so. That's a very different challenge. The more I studied the two companies, the more I realised they aren't really competing on the same battlefield. HDFC Bank is optimizing scale. AU is optimizing growth. HDFC wins because of trust, distribution and execution. AU wins because of agility, higher yields and a much longer growth runway. And maybe that's the lesson. Smaller companies don't beat market leaders by copying them. They beat them by doing something the leader cannot easily do anymore. Grow faster. So the real question is: Would you rather own the bank with the strongest franchise today, or the bank with the biggest opportunity to improve over the next decade? Parth Verma The Valuation School #100DaysWithTVS #LinkedIn #Finance