#9 Investing Ideas – HDFC Bank Limited (NSE: HDFCBANK)

This week, we chat with Chong Ser Jing, co-founder of thegoodinvestors.sg and my former colleague at The Motley Fool Singapore. Ser Jing has always been an investor who is able to think outside of the box and this week he shared with us why his favourite bank right now is the HDFC Bank based in Mumbai, India.

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Disclosure: Stanley and Ser Jing do not own HDFC Bank at the point of the recording. Stanley and Ser Jing own Berkshire Hathaway at the point of recording.

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Full Transcript

Stanley: Hello! Welcome to another episode of investing ideas. This week, we have a very honored guest, my ex-boss from The Motley Fool Singapore. Hello! Ser Jing!

Ser Jing: Hello everyone, just to clarify, I’m not Stanley’s ex-boss.

Stanley: Okay! So, I worked very closely with Ser Jing, would you say you’re employee number 3 of Motley Fool, Singapore?

Ser Jing: Yes, employee number 3, yeah.

Stanley: I was employee number 4, I think.

Ser Jing: Yes.

Stanley: So, that’s why I said he’s my boss and he coordinates the investment team in Motley Fool Singapore. So, yeah we come a long way and I’m very honored for you to join us on our show.

Ser Jing: Yeah! I’m very happy to be here.

Stanley: Of course, before we get started into the episode, I guess maybe you can give a little bit short introduction about yourself, and also what kind of investor are you to set the stage for the audience?

Ser Jing: Sure! So, I’ve been working with the Motley Fool Singapore since January 2013, and then in October this year, like some of you may know, the company closed down. So, I’m actually now in the process of setting up my own investment blog as well as my own investment plan: Hopefully, the blog will be ready by the time this podcast or this video gets into publication. So, from the perspective of where I’m from as an investor, I have actually always been very much focused on long term investing, and I try to buy good companies that can grow over the long run, and hold them for a very long time, it’s also how I have approached picking stocks for the Motley Fool Singapore [Unclear 02:36], that is there is a general framework that I use that I’ve developed over time. So, I think where I come from is; I first think about the stock market, and what is the stock market? It’s actually a place that lets people buy and sell pieces of companies, and then the next logical question would then be; you know, if it’s a place to buy and sell pieces of companies, then what would actually cause a stock’s price to rise over time? Then I think the logical answer would be; the stock’s price will rise over time if the underlying business actually does well, and then that leads us to another question; Which is like so if that’s the case, what are some of the key points that can lead us towards finding companies that can potentially do well over the long run? So, I have come up with a list of criteria that I tend to look for on my investments, so I want to – there are six criteria in total, the first is that I want companies that are operating in large or growing markets, so I do not want companies like for example; say Singapore Press Holdings, which has its primary business in print advertising, which is a declining industry and market, I want companies that are operating in areas that still have tremendous room for growth. The second thing I look out for is, I want companies with strong balance sheets that have either reasonable or minimal levels of debt, because with a strong balance sheet, a company will be able to last through tough times, and it may even be able to grow in tough times when it’s weaker competitors are struggling with that business, and then the third thing I look out for is, I want management teams with both integrity and capability as well as the ability to innovate. So, when it comes to like integrity, some of the classic things I look out for would be like the presence or absence of related party transactions. So, for example; if you are a restaurant operator, and you also own raw food ingredients supplies, you know, it’s very easy for you to overcharge the restaurant, if that’s the case. So, I look out for the absence or presence of related party transactions and then I think a really good example on that would be like we look at Haidilao, which is actually listed in Hong Kong; the top five suppliers of Haidilao are all controlled by the management of Haidilao itself, or rather the founder Zhang Yong, and so in such cases, there’s actually a lot of room for Zhang Yong to be playing games with Haidilao, and all the other supplier companies that he’s controlling, but the good thing is that, if you check Haidilao’s profit margins over time, you realize that they have been relatively stable and at a healthy level and I think somewhere between like 10 or 15%. So, I think looking at those numbers and the chances of Haidilao’s management actually playing games through related party transactions are low. So, these are some of the things that I look up for, and when it comes to like the capability and ability to innovate; I will just look at a company’s history of retirements, and think through how it has managed to grow its business, or grow the types of products and services that is providing to its customers. And the fourth thing I look out for, which I think it’s not something that many investors focus on, which i think is really important is the presence of recurring revenues. So, recurring revenues can actually come from a few ways, it can come from customer behavior, or contracts, or simply a reasonable business model. So, just to quickly explain, so customer behavior would be things like say; a Starbucks or MasterCard, you know, each time you make payment from MasterCard or Visa, the company gets a cut of the transaction fee, and you make those payments over and over again, same thing goes with like buying a cup of coffee from Starbucks, and when you talk about contracts it would be like subscriptions, so I think a classic example would be like mobile subscriptions, you pay your mobile operators a certain fee every month or every year, and then get the service delivered to you, and then when it comes to reasonable business model, I think a really good example would be a company in Houston, US called Intuitive Surgical; which I own shares of, Intuitive Surgical makes surgical robots, but the good thing is that, besides selling those robots to hospitals and surgeons, it actually also sells all the little tools and surgical instruments that are used in each surgery, and this tools and parts are actually have to be replaced after every surgery. So, in a way, it generates a very strong stream of recurring revenue for Intuitive Surgical, with each sale of a robot, I think right now, something like 70% or so of Intuitive Surgical’s revenues actually comes from this consumables, and then the fifth thing I look out for is; I want companies that have a proven ability to grow, so I do not want just companies that you know promise the sky, or say that they have large markets, or they want to do these, and achieve that, I want companies that have been able to do what they have said, or even better you know, do even more than what they have said. So, I look at a company’s track record, and that is important to me. The last thing I look out for is, I want companies with a business model that gives me confidence, that you can produce a high level free cash flow in the future. So, for example; like there are companies that can generate revenues and profits, but without cash flow, so a good example would be, let’s say if you are building an oil rig and the contract takes you five years to complete the construction of the oil rig but the customer will pay you only at the end of that five years. So, within those five years you may be able to recognize revenue and profits, but the cash actually does not come until the very end, so I do not want business models that have lumpy free cash flows, or that have low free cash flow margins, I want companies that can produce a very high level of free cash flow. So, I think when I put all these criteria together, it can more often than not lead me to companies that will be able to grow well, and grow at a high rate over a long period of time. So, most of the companies that I invest in, they tend to excel in most or all of these six criteria.

Stanley: Wow! Very, very comprehensive criteria that you list out for us, I hope all audience are actually taking notes, but I’m going to put you up for the test, and go through the six point on this company that you’re going to present. Why don’t you go ahead and – to be honest, I always hear, when we are working together, I always hear you talking about stocks in the US, or even Singapore, but very, very rarely I hear you talk about stocks from this market. So, why don’t you share this idea that you have for us today?

Ser Jing: Sure! So, the company I’ll be talking about today is actually HDFC Bank, so it’s actually listed in two of India’s major stock exchanges, and that would be the National Stock Exchange of India, as well as the Mumbai Stock Exchange. So, the reason why I’ve actually not talked about Indian companies too much is because it’s really difficult for non-Indian residents to actually be investing in Indian listed stocks, and the reason why I’m looking at HDFC Bank is because the company actually has a secondary listing in the US. So, it makes it a lot easier for people outside of India to be investing in it, so that’s the main reason why. So, HDFC is actually a bank, it’s headquartered in India, and it’s one of the largest private sector banks in the country today, it has more than 5000 branches throughout India, and it’s also somewhere along the lines of 50 million customers or so. So, HDFC’s main business is actually in lending, it generates about 70% of its total revenues from net interest income, which is the income that a bank runs from basic lending activities, so HDFC has a wide range of lending products; it lends not just to individuals, but also to all wide range of businesses, and then it also generates about 30% of its revenues from non-lending activities through the provision of financial services.

Stanley: So, this is a very traditional bank, right?

Ser Jing: Yes! Correct, very simple…

Stanley: Okay, and then when you talk about that they have a secondary listing in the US, can you explain a little bit for maybe our audience they are not familiar with investing outside of the own market, HDFC Bank they have ADR, but what really is an ADR, and are we really investing in the shares, or the company, how does it work?

Ser Jing: Yeah! Sure! So, ADR is the short form for American Depositary Receipts, so it’s actually a program that HDFC set up together with JP Morgan, so what happens is, one US listed ADR of HDFC Bank is equivalent to three actual shares of HDFC Bank. So, there are today, I think slightly over a billion India shares of HDFC that’s listed in the US, so that would equate to about 314 million or so of these ADR’s. So, this ADR are actually backed by actual HDFC shares, and there’s a lot of liquidity involved, there are some ADR’s that I think in Singapore’s case, we also have such programs, but trading liquidity is often very poor, but in the case of HDFC, monthly trading volume has never been lower than 20 million of these ADR’s. So, it’s a very liquid kind of a listing in the US.

Stanley: Wow! Okay! Cool! So, for a foreign investor investing in the ADR, there’s almost not much difference in investing in ADR, and compared to if you are an Indian national, and you can invest directly in the bank as well, right?

Ser Jing: So, there is a slight difference, because the ADR has a small premium, somewhere in the high single digit percentage range, over the India listed share price, but that premium has kind of existed for a very long time as well. So, I don’t think it’s a premium that will close; in any case, I think that kind of small premium does not matter much over the long run anyway.

Stanley: Okay! Cool! Yeah, just maybe something for foreign investor to take note of, why don’t we go back to the bank as a company by itself, there are so many Banks in India, why do you like this one?

Ser Jing: So, there are a few key things that I like about HDFC Bank, so I think the most important thing we can run through: First is, like maybe we can have a short history of India’s banking industry, so India’s banking system has many different types of financial companies, for a very long time, their banking system was closed, and it was only run by banks that were owned by the government of India, and it was only in the mid 1990’s that the government opened up the banking industry, and so that birthed the existence of private sector banks, and HDFC was one of the very first few private sector banks that got their license to be running banking services, and what’s amazing is that, since HDFC’s existence, it has actually been growing its earnings per share, book value per share every single year, and the growth rates have actually been very impressive too, because if you look at say – so HDFC’s fiscal year ends on 31st of March, and if you look at the fiscal year 1996 to the fiscal year 2019, HDFC’s book value per share has actually compounded at 27% per year, and his earnings per share has compounded at 29% per year, and this growth rates have actually also been a similar level, even if you look back at say the past five years, or past ten years. So, one of the key reasons why I really like HDFC Bank is that, this is a bank that has been able to grow really well over a long period of time. Now, I recall in one of Warren Buffett writings, or interviews, or something, he has mentioned before that, he’s generally wary of financial institutions that have been able to produce strong growth, but the reason why I’m so comfortable with HDFC’s growth is because, the bank has actually been able to grow at a very – what do you call it? A conservative way, because if you look at say the bank’s leverage ratio, which is total assets over stockholders equity; since its listing right or rather, since it’s fiscal year 1996, that ratio has averaged just 11.5, and today the ratio is around 8.5, and if you compare it to like say our local banks in Singapore, DBS or CBC or OB, these banks have leverage ratios of in the low-teens range, so HDFC from an average perspective is, in fact even safer than some of the banks in Singapore, but that’s not just all, because the bank has also managed to grow while keeping asset quality really strong, so the bank started reporting it’s a non-performing assets ratio, so that’s the equivalent of Singapore’s non-performing loans ratio, so the non-performing assets ratio since the fiscal year 2002 has actually never been above 2%, and in fact has averaged at around 1.36% in those years, and if you look at India’s banking industry as a whole today: for example, private sector banks has a non-performing assets ratio of more than 10%, whereas HDFC today is only like around 1.4% in terms of its non-performing asset. So, this is a bank that has been able to grow at very strong rates, in a very conservative manner, and it’s so you know, when looking at a stock, we’re not just looking at its history, we also have to think about whether or not it’s poised for growth going forward, so when I look at the entire picture with HDFC, an India’s banking industry, I think that there are really strong long-term tailwind for the bank, so as an example, much of India’s population today is unbanked, about 40% of the adult population of India has a bank account today, so you’re looking at about sixty percent of India’s population that still do not have bank accounts according to government data sources, and in fact just two percent of the population have credit cards, so access to credit, and access to banking services in India is still very much in the early days. Now, I think that that leaves a lot of a runway for HDFC to be able to grow, but not only that, if you look at say India’s population, there’s such a tremendous tailwind, so if you look at it from today to 2050, India’s working-age population is projected to increase by nearly 30%, and of a very high pace. Today, India’s working age population is about 860 million people, and that is projected to increase to about 1.12 billion by 2050, and if you look at say China; China’s working age population over the same period is expected to decline by about 20%, and in the US, the working age population is expected to grow by only about 10 percent. So, in India, you have this very much under penetrated banking industry, and at the same time you know, this huge growth in the working age population, and I think that these two are just really powerful tailwinds for HDFC, and but of course again you know, we have to be wary of just looking at macroeconomic tailwinds, we also have to be sure that a company would have the capability to win market share and continue to grow in this market. So, if you look at say HDFC, today its market share in terms of India’s banking industry is still growing; at the end of 2018, the bank had about 7% of the total banking deposit market in India, and in terms of the loans market, it has a market share of less than 10%. Now, from fiscal years 2013 to 2018, the growth rate of India’s loan market in each of those years was 16% at most. Whereas HDFC’s growth rate in loans was actually between 18.7% to 26% over the same period, so you can see that HDFC has actually been managed to grow its loans portfolio at a much faster rate, and the entire Indian banking industry. So, that’s I think a sign of the company being able to win market share, and I think that if you look at a HDFC’s track record, then I think a logical question will arise in that, how has the bank been able to go so well, and I think this boils down to HDFC’s DNA in the way it looks at its customers. So, to HDFC, its building a great customer experience, in terms of for both depositors as well as burrowers, it’s top of the mind for HDFC, and the bank has over the years been innovating rapidly to really just improve the entire user experience, when it comes to customers using HDFC services. So, for example, the bank was actually the first bank in India to have launched Internet Banking and the mobile banking services, all the way back in the late 1990s and early 2000s, and today right, customer initiated transactions in HDFC through mobile and internet channels are 92% of all transactions, and this has increased from about 30% in 2009. So, you know, what this means is that, HDFC’s customers can actually conduct most of their banking activities through online and mobile channels, and this creates a very high level of convenience and usability for its customers, and if you look at from the loan lending product angle, HDFC has also been able to streamline its loan approval process tremendously, so it’s actually the first bank in India to introduce a 10 second approval for customer loans. So, for example, if you’re an individual, and you want to make a loan with HDFC, you can initiate that loan approval through your mobile or internet channel, and get it approved in under 10 seconds, and if you are a small/medium enterprise, you can get a loan approved in under 3 hours. So, can you imagine how convenient it is for HDFC’s customers to actually be borrowing money from HDFC, and so when i put all these together, i think that you know, this is a bank that likely will have a lot of opportunity to grow in the years ahead.

Stanley: Wow! Okay, you give a very compelling reason, and a growth potential for this Bank. Let’s go back to some of the question that I was thinking while you were explaining the stock to me, you mentioned that HDFC is one of the largest private bank in India, the others, the large ones I guess are government link banks, is there still a key difference between the two, does government banks still has some advantage over the public sector, and what’s their relationship?

Ser Jing: I’m sorry, I did not catch the question, and can you repeat that again?

Stanley: Yeah! So, I was saying when we looked at you say that many of the banks in India, large banks are still government banks, do they have like sort of a regulational protection or advantage over private banks, or is there hindrance for private bank to compete in this space compared to the government link banks?

Ser Jing: So, actually on that aspect, I’m not sure if the public sector banks in India are protected by the government, but if I look at the growth of HDFC, and some of its other private sector peers, I don’t think that public sector banks are afforded any form of high levels of protection, because the private sector banks have actually been able to grow very strongly since their creation in the Indian banking industry.

Stanley: Okay, and maybe you can share a little bit, you talked about you know, about sixty percent of India’s population are still unbanked, how is HDFC acquiring new customers and depositor, because I assume that this is not just about opening a branch, and people start depositing with you, it’s almost like you have to educate the population that putting your money in the bank is safe, so can you compare or share some examples of how they’re actually increasing their depositor base?

Stanley: Oh! That’s an excellent question, so what HDFC has done is that, it has actually been very methodically building a bank branch footprint in the rural parts of India, where the banking penetration is the worst. So, it has –so I think around half of India of HDFC’s bank branches of more than 5000 across the country, nearly half are actually in rural areas in India. So, it has made a very strategic decision to be opening bank branches in India, but more so than that, so HDFC’s philosophy about banking is that it wants to make its whole banking experience seamless for customers; so for example, you can walk into a branch, and then maybe you can get something done, and then you walk out of them of the bank branch, and then you can continue that transaction on your mobile device or through the internet. So, I think what HDFC has done really well is to really just create this extremely seamless mobile and branch banking initiative, so it has made this a very seamless experience for its customers, and so like when you when it opens bank branch in rural parts of India, it’s able to attract people who walk into the branches, but more so than that, when they walk out of the branch, they are still able to continue their banking relationship with HDFC bank. So, I think that’s one of the things that HDFC has done really well.

Stanley: Okay! Cool, and also you talked about like mobile banking and internet banking as well, I just want to check with you, have you done Studies on the Indian digital payment market ,because we’ve seen examples from China, how their e-wallet guys are able to grow so aggressively is because at the beginning, getting a credit card in China is very difficult, and people just pivoted to digital payment as a mode of payment, and that’s why it created their growth, and in India similarly, you say the credit card penetration is very weak, do you see a lot of the e-wallet guys in India also gaining steam in growth, and would that become a threat to traditional banks like HDFC?

Ser Jing: So, I think this is really interesting, so one of HDFC founders, and who is also currently managing the bank, his name is Aditya Puri. So, in a recent interview, he actually said that you know, he is actually not worried about HDFC being disrupted by FinTech players like a digital wallet providers, and the reason is because, the banks today have actually hold most of their customer relationships, and to him right, the most important thing is not just —there are two important assets in terms of like this banking business; The first is that who holds the customer relationships, so in this case, it is still the banks that are holding the customer relationships, now the second important thing is that, are the incumbents, are the banks innovating fast enough such that they create a really good experience for their customers, because you think about this, the reason why disruptors can win market share is because they either are able to provide a service cheaply, or able to provide a better service. Now, if you have an incumbent that is working very hard at both lowering the cost of its services, and also delivering a more convenient service, then I actually agree with Aditya Puri you know, if the incumbent is able to continue innovating and improving the services that it provides with its customers, then it will not be easy for a new player to come in and disrupt the incumbents business. So, I think it all boils down to how the incumbent is thinking about competition, so I think in the case of HDFC, I’m not too sure about the rest of Indian banks, but in the case of HDFC, looking at the way it has innovated in a mobile and digital banking space, I think that there is very little room for new upstarts to come in and take his business.

Stanley: Right! Okay, from what you’re saying, I get a sense that your thesis on this company is not just on the growth of the macroeconomic situation in India, and also you have some trust in the management of HDFC as well, but let’s look at – because this is still a bank, and maybe not even the largest bank in India, and in a very still under developed country, what would you say is the key risk for this investment?

Ser Jing: So, the key risk for this investment would really be the planned retirement of Aditya Puri, so Puri has been heading and leading HDFC since the bank’s founding, but in India there are rules that bankers have to retire age of 70. so in October 2020, is the time when Aditya Puri will reach the age of 70, and so he’s scheduled to step down, so I think that is probably the biggest risk to HDFC Bank, but there is currently a transition plan in place, one of the banks longtime leaders his name is I think – I hope I’m pronouncing correctly Sashidhar Jagdishan, he has been with HDFC since 1996, and is one of the important executives HDFC. So, there have been recent changes in terms of like their portfolio that is managing HDFC, so most of the banks important portfolios are now under Jagdishan. So, I think there’s some form of continuation there in the leadership transition, and since we’re on the topic of management, I will also like to point out that one of the really interesting aspects of HDFC’s management is, that I like, so the first thing is that, the bank’s managers are actually paid relatively small amounts compared to the bank’s profit, so like for example, HDFC’s market cap today is about two times that of DBS Bank and yet Aditya Puri total compensation is about 2.6 million dollars, and compare that to the CEO’s of our local banks, it’s way higher, it’s probably around 10 to 12 million dollar mark, so you have a leader of a very large bank that is actually compensated in a very reasonable amount, and if you look at the incentive structure of the bank, it’s also really interesting, because HDFC’s top management are actually compensated partly based on the bank’s non-performing assets. So, I think having that trait alone would help, I’m sure that the bank would be very prudent in terms of taking risk, because management would not to be making bad loans to chase growth, because there are compensation actually depends on the amount of bad loans that HDFC has.

Stanley: Okay! Cool! I just want to go through your six points right, six points on the company maybe just on the last point you talked about where I remember saying that you like companies with strong free cash flow, but in this case, for a bank, free cash flow is quite irrelevant, and it’s hard to predict, and so would that make you more worried that you’re investing in a bank, or you know, it doesn’t really matter for you in this case?

Ser Jing: So, I have a small joke about investing, and I often say that you know, investing is very important to know all the rules, but it’s also equally important to know when to break those rules, so in HDFC’s case, I think that is that like you correctly mentioned, free cash flow is kind of irrelevant to a bank, so free cash flow is relevant for most companies, but when it comes to a bank is about thinking through what other more relevant matrix. So, in the case of HDFC you know, or rather in the case of banks in general, I look at the leverage ratio, I look at the earnings per share, I look at the book value per share, and I look at liquidity risk in the form of like the loans deposit ratio, and I look at how management is incentivized. So, when I look at all these important numbers, especially like the book value per share, leverage ratio, I think HDFC fares very well on both fronts.

Stanley: Oh! Okay! Yeah, fair enough, so why don’t we you know, go straight into the more important things as an investor, how do you value this company, what is their evaluation right now, and do you think they’re attractive right now?

Ser Jing: Yeah! So, I think the best way to value a bank would be to look at its price to book ratio, so that would be comparing its share price to its book value per share, so in the case of HDFC; currently, it’s book value per share is somewhere around 4.5, and that is if you look back at history right, that is actually not high in relation to where the bank was trading at, in fact I have some really interesting statistics as well about the bank’s valuation. So, if you look back at say October 2007, so that is like where most countries stock markets hit a high before the great financial crisis happened, so in that period HDFC’s price-to-book ratio is actually more than eight times, and today the price to book ratio has fallen by a half to about 4.5, and yet you know, the bank’s share price is still been able to grow at about a 13% compounded rate of return, and you know I look at today, and you might think that a price to book ratio of about 4.5 is high, and that is high, if you look at say compare it to our local banks in Singapore, we are trading at price to book ratio, and I think maybe about 1.2 to 1.5, so first of all, ratio of 4.5 is definitely high, but then HDFC is growing at probably four times the rate of what our local banks are also growing. So, from that perspective, you look at the growth rate and then you compare it to the valuation, then I think that it’s very reasonable price to pay.

Stanley: Right! Okay, I’m going to challenge you on that, when I invited you to share an idea, I know you’re going to share some not so traditional type of investment, and you surely haven’t disappointed me, and most of the stocks that you always talk to us about, I would say that they are cheap if they’re trading below 30 times PE. So, on the valuation side, you definitely have not disappointed us, but if I can challenge you, to me I find no difference in banks anywhere around the world, I just find you know, they are all just banks, and I see them as a proxy to the economic of the market that they serve. So, if you compare to all the banks around the world right now that we can’t invest in, be it in Singapore where you say the price to book is about 1.2 1.3, even in the US, my co-founder Willie, a few weeks ago, he presented Wells Fargo, trading also around one time Book value, you have the Chinese banks now at 0.5 time Book value, so you’re telling me that compared to all these banks, if you are to choose, you still prefer to invest in HDFC, is that right?

Ser Jing: Yes! Correct. I will still…

Stanley: And why is that?

Ser Jing: So, if I look at say the track record of growth like HDFC, I think would head and shoulders above most of all the – it’s definitely way better than our banks in Singapore, it’s way better than like the banks in the –especially the large banks in the US, like for example, Wells Fargo, I like what Willie has presented but also when I look at Wells Fargo, I can also see that it has not been able to grow his book value per share for a number of years now, whereas HDFC is still continuing to grow at rates of above 20%, and then if you look at say the Chinese banks now, that one will be interesting because China’s economy is also growing rapidly, so India and China actually are two very large countries in terms of their population, that is still go to produce very high levels of economic growth, even though both countries are now facing some slowdown in economic growth. So, if you look at say China, then you might think that you know, trading at way less than 1 times Book value, and with this high economic growth in China, isn’t that a good thing to bank on, perhaps but I do not have a good handle in terms of like how these Chinese banks are lending, because in India, you have the public sector banks, which are controlled by the state, and then you have the private sector banks, and that’s the very state of India does not have much control over what these private sector banks are doing beyond say implementing rules by from the central bank, but in China’s case you know, you have banks that are in a way all controlled by the government. So, I’m not sure in terms of like are they have they been prudent in terms of their lending activities, so that’s just one area that I’m worried about because in India, it’s very clear-cut that the public sector banks are making loans by making very bad loans, if you look at as I mentioned earlier the non-performing assets ratio for the public sector banks in India is more than 10%, whereas with HDFC, we are looking at way below 2%, so like you know, I’m not sure if the banks in China would end up to have been found to have been making very bad loans, because they are being directed by the government to make certain decisions that are in the interest of the country, but maybe not so much in the interest of shareholders.

Stanley: Okay! Yeah, fair enough. I buy your argument, and also I always find the Indian market very fascinating, but it’s just a market that I’m not familiar with, so I haven’t really invested in the market, but I remember a long time ago, there’s a saying, somebody once said that both the India and China market are growing, but the China market is growing because of the government, and the India market is growing in spite of the government. So, you sort of have a question yourself like which market is actually more resilient by itself, and you make a good point on the difference between a government linked bank in India, and a private sector bank in India. So, this is definitely one of a very interesting company that we know through our program, that you have presented, so I thank you once again for your time and your research, I hope our audience will enjoy this idea as well. Thank you so much again Ser Jing.

Ser Jing: Oh! Thanks Stanley! Hope everyone enjoys too.

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