The survey, concluded that a whopping 73% of the respondents see no change in the housing major's perception. Conducted by Researchbytes.com - India's leading platform that connects companies with institutional investors - had a sample size of 361 fund managers and both buy side and sell side analysts. Importantly 48% of the respondents were comfortable with HDFC's accounting practices if they are within the stipulated norms while 44% expected HDFC to be more conservative in its accounting process. In its June 14 report, Macquarie had blamed HDFC for adopting aggressive accounting practices in the last two years by passing provisioning through reserves and also making the adjustments for zero-coupon bonds through reserves. It had also downgraded HDFC to underperform and cut target price by 30% to 550 rupees. The report further said that earnings for FY11 and FY12 were overstated by 38% and 24% respectively and return on equity would have been 600 and 400 basis points lower at 16% and 18% respectively if the adjustments had been made through the profit and loss account. HDFC management had strongly denounced the report and accused Macquarie analysts of neither meeting the company officials nor verifying facts. The survey further showed that 64% of the respondents felt that Macquarie's views on HDFC were partly justified while 10% felt that the research house was fully justified in its views. A sizeable 26% felt that the views were not at all justified. The respondents were almost evenly split on the issue of corporate governance. 52% respondents felt that best corporate governance practices should be more aligned with shareholder interests while 48% were of the opinion that they should be aligned with accounting standards. Wednesday, HDFC announced a 19% jump in its net profit for the Apr-Jun quarter at 10.02 blnrupees compared with 8.45 bln rupees a year ago on the back of rising loan disbursals for individuals. Thursday, shares of HDFC closed at 675.85 rupees. In the one-month since the publication of Macquarie report, HDFC shares have not been hit and continued to trade well above 600 rupees. On the day of the report, HDFC shares had closed at 633 rupees and have thus gained nearly 43 rupees.

1. Perception Study
on
Macquarie’s report on HDFC Ltd.
12 July 2102
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

2. BACKGROUND
On June 14, 2012 Macquarie Equities Research downgraded HDFC, India’s largest mortgage lender, to UNDERPERFORM and
cut target price by 30% to Rs. 550. In its research report, Macquarie said that over the past two years, HDFC has been
adopting aggressive accounting practices by passing provisioning through reserves and also making the adjustments for zero-
coupon bonds through reserves.
The report said that earnings of two previous years - FY11 and FY12 are overstated by 38% and 24% respectively and
reported return on equity would have been 600 and 400 basis points lower at 16% and 18% respectively if the adjustments
had been made through the P&L.
The report said that competition is intense and likely to increase since banks have limited opportunities in the corporate
segment. Macquarie said that it presents a strong case for de-rating. The regulator has increased the provisioning
requirements, banned pre-payment charges, and asked for re-alignment of rates for old and new customers. These
regulations are likely to impact the lender.
Reacting strongly to the report, HDFC said in a statement that its “management completely disagrees with the contents of
the Macquarie report dated June 14 as the analyst concerned has not attempted to meet anyone from HDFC before making
the aforesaid report and verify the facts and statements made therein.”
This survey aimed to understand the impact of the downgrade rating on HDFC by Macquarie from the perspective of fund
managers and analysts. The online survey was in the field from 22nd June 2012 to 11th July 2012 on www.researchbytes.com.
It includes responses of more than 361 fund managers and buy-side and sell-side analysts tracking Indian equities.
Participation in the survey was limited and exclusive to the members of www.researchbytes.com.
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

3. ABOUT RESEARCHBYTES.COM
Researchbytes.com (RB), a personal research associate of fund managers and analysts, is India’s largest and an exclusive
platform that connects listed Indian companies with institutional investors and analysts.
RB ensures greater information exchange between corporates and the investing community by providing access to all public
information on listed companies such as quarterly results table, investor presentations, quarterly investor updates,
conference call transcripts, annual reports etc. to fund managers and analysts. More importantly, it helps fund managers and
analysts keep track of events such as earnings conference calls, analyst meets, quarterly results, AGMs, etc.
Today, more than 4000 analysts and fund managers across the globe tracking Indian equities use researchbytes.com to keep
themselves abreast of company specific information and data on over 4,000 Indian listed companies.
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

4. RESPONDENT PROFILE
Number of respondents: 361
COMPOSITION
 Respondent universe represented a healthy mix of top as well as mid-sized broking and fund houses
 Analysts and fund managers from Singapore, Canada and USA also participated in the survey, apart from India
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

5. TRACKING INTEREST
 60% respondents track the Indian banking sector/financial sector
 A broader sample size ensured a holistic perspective from the analyst community
 Among the respondents tracking the banking sector, fund managers accounted for 9%, buy-side analysts were
47% and sell-side analysts were 44%.
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

6. Summary of Findings
 64% respondents felt that Macquarie’s views on HDFC were partly justified while 10% felt that the
research house was fully justified in its views. 26% felt that the views were not at all justified
 But an overwhelming 73% respondents felt that there has been no change in HDFC’s perception post
the Macquarie report
 44% respondents felt that HDFC should have followed a more conservative approach in its
accounting practices while 48% were ok with HDFC’s accounting practices if they are within
stipulated regulations
 But 98% respondents felt that Shareholder Activism is sometimes or always good for healthy
corporate governance practices
 However, 52% respondents felt that Best Corporate Governance Practices should be more aligned
with shareholder interests while 48% are of the opinion that they should be aligned with Accounting
Standards
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

7. SURVEY FINDINGS
1. On if they think that Macquarie’s views on HDFC are justified?
 Majority of respondents believed that there is no smoke without fire. However, they deferred on the intensity of
the findings
 Of the respondents tracking banking sector, the responses remained same, with 28% believing that the views are
‘not at all’ justified, while 62% believed that the views are ‘partly’ justif
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

8. 2. On if they think that the perception of HDFC has changed amongst investors post this report?
 73% respondents think that the report will have no impact (or neutral impact) on investor perception of HDFC
 Of the respondents tracking banking sector, 75% thought that the report would have a neutral impact amongst
investors
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

9. 3. On if they thought that HDFC should have followed a more conservative approach in its accounting
practices?
 While 8% of the respondents were satisfied with the existing accounting practices; 48% agreed with the current
accounting policies “if they are within regulatory requirements”, reflecting the accepted industry norms
 44% of the respondents thought that HDFC SHOULD have followed a more conservative approach
 Of the respondents tracking banking sector, 50% thought the present accounting practices to be OK, if they align
with the regulatory requirements; 41% thought that a more conservative approach should have been followed
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

10. 4. Their views on if shareholder activism is good for healthy corporate governance practices?
 53% of the respondents think that the shareholder activism is ALWAYS beneficial for instilling healthy corporate
governance practices, while 45% agreed on the impact but deferred on the frequency
 Of the respondents tracking banking sector, 55% responded with ALWAYS
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.

11. 5. On whether Best corporate governance practices are more aligned with accounting standards or
shareholders interests?
 A close result, with ‘Shareholder interests’ marginally getting more voice share in the survey
 Of the respondents tracking banking sector, 47% thought the corporate governance policies to be more aligned
towards accounting standards, while if they line with the regulatory requirements; while 53% thought it to be
aligned with shareholder interests
Disclaimer: Researchbytes.com (RB) is an independent investor connect platform. The results of the survey conducted are based on
the feedback provided by Institutional investors on RB and are in no way manipulated by RB or its employees. This is an independent
survey conducted based on public information published and is intended as a general reference for the benefit of the public. RB
recommends that viewers exercise their own skill and care with respect to their use of the survey results.