HDFC Bank Ltd

NSE: HDFCBANK · BSE: 500180 · Banks — Private · Initiating Coverage · 2-Jun-2026
Tier 1 · Institutional Analyst: A. Desk · CFA
RatingBUY
CMP₹749
Target price₹1,060
Upside~42%
Horizon12 mo
MethodResidual Income (primary) (RI base ₹1,063 · SOTP floor ₹830)
01

Executive Summary & Overview

▢ excluded
Investment thesis▢ excluded
01
Merger drag is transitional, not permanent. ROE fell from 16.96% (FY23) to 14.09% (FY26) and NIM compressed from 3.52% to 2.94% — but EPS grew every year (₹41.22→₹49.39). Recovery to 14.5% ROE expected by FY29 as costly legacy HDFC Ltd borrowings are repaid. Trigger: NIM inflection as deposit mix improves.
02
Subsidiary value under-priced. HDFC Life (50.21%), AMC (52.37%), HDB Financial (74.12%), ERGO (50.33%), Securities (94.01%) contribute ₹120/share; after 15% holdco discount = SOTP floor ₹830. Trigger: HDB Financial IPO.
03
Share-price de-rating creates asymmetric entry. ₹10,000 invested 5 years ago = ₹9,982 today vs ₹19,085 for ICICI and ₹22,063 for SBI. Franchise quality intact; upside ~42% to RI-derived target of ₹1,060.
Catalysts & risks▢ excluded
Top catalysts
• Legacy HDFC Ltd borrowing repayment → NIM recovery
• HDB Financial IPO unlocking subsidiary value
• Deposit-led funding improvement + operating leverage
Key risks
• Integration execution failure prolonging NIM compression
• Asset-quality deterioration (NPA shock → ROE ~12%)
• ESG/governance overhang (chairman resignation, Dubai matter)
Snapshot & P/ABV band▢ excluded
P/ABV band · FY14–FY26E (avg ±1 SD)
Quick metrics
Mkt Cap₹11,52,822 Cr (US$121.2 bn)
52-Wk High / Low₹1,020 / ₹727
Avg Daily Value₹2,413 Cr
RoA / RoE FY261.87% / 14.09%
NIM (Q4 FY26)3.53%
GNPA / NNPA1.15% / 0.38%
P/BV FY262.07×
Shareholding (Mar-26): FII 44.05% · DII 40.14% · Public 15.64% · Promoter 0.00%
02

Financial Performance

▢ excluded₹ bn · Consolidated
Income statement▢ excluded
₹ Cr · Segment Revenue
Segment / Product Q4 FY26
31.03.2026		 Q3 FY26
31.12.2025		 Q4 FY25
31.03.2025		 Full Year FY26
31.03.2026		 Full Year FY25
31.03.2025
a) Treasury17,295.9618,148.9616,910.3684,337.4862,227.48
b) Retail Banking74,757.5976,320.2273,391.303,01,853.512,83,434.79
(i) Digital Banking Units2.762.502.4010.378.59
(ii) Non-Digital Banking74,754.8376,317.7273,388.903,01,843.142,83,426.20
c) Wholesale Banking44,643.7142,764.0049,637.351,74,506.301,91,964.51
d) Other Banking Operations9,265.099,548.429,573.1136,840.9635,449.05
e) Unallocated0.000.000.000.000.00
Total Segment Revenue1,45,962.351,46,781.601,49,512.125,97,538.255,73,075.83
Less: Inter-Segment Revenue56,153.4556,776.6060,024.132,27,483.602,26,926.51
Income from Operations89,808.9090,005.0089,487.993,70,054.653,46,149.32
Balance sheet▢ excluded
₹ Cr · Statement of Assets and Liabilities
Particulars As at 31.03.2026
(Audited)		 As at 31.03.2025
(Audited)
CAPITAL AND LIABILITIES
Capital1,539.34765.22
Employees stock options outstanding4,545.113,805.19
Reserves and surplus5,56,816.454,96,854.21
Deposits31,05,250.4827,14,714.90
Borrowings4,89,394.635,47,930.90
Other liabilities and provisions2,07,340.311,46,128.52
Total Capital and Liabilities43,64,886.3239,10,198.94
ASSETS
Cash and balances with Reserve Bank of India2,00,679.371,44,355.03
Balances with banks and money at call and short notice97,786.9995,215.65
Investments8,84,201.478,36,359.68
Advances29,37,166.2626,19,608.61
Fixed assets14,724.6413,655.40
Other assets2,30,327.592,01,004.57
Total Assets43,64,886.3239,10,198.94
Cash flow▢ excluded
Values in ₹ '000 · Annual
Particulars Year ended
March 31, 2025		 Year ended
March 31, 2024
Cash flows from operating activities
Profit before income tax8,84,780,5607,08,953,051
Adjustments for: Depreciation, Provisioning, Amortisations, etc.1,49,584,7731,90,034,713
Adjustments for changes in investments, advances, deposits & other assets/liabilities5,91,164,780(3,50,400,742)
Direct taxes paid (net of refunds)(1,73,757,076)(1,98,437,376)
Net cash flows from operating activities14,51,773,0373,50,149,646
Cash flows from investing activities
Purchase / Sale of fixed assets (Net)(31,082,460)(37,388,898)
Investment / Sale of investment in subsidiaries (Net)(11,177,695)95,006,717
Dividend from subsidiaries21,870,10113,323,911
Net cash flow (used in) / from investing activities(20,390,054)70,941,730
Cash flows from financing activities
Proceeds from share capital / warrants63,464,97384,425,444
Decrease in other borrowings(11,44,291,825)(2,22,750,573)
Dividend paid during the year(1,48,261,930)(84,044,222)
Net cash flow used in financing activities(12,29,088,782)(2,22,369,351)
Effect of fluctuation in foreign currency translation reserve1,938,3301,012,629
Net increase in cash and cash equivalents2,04,232,5311,99,734,654
Cash and cash equivalents at the beginning of the year21,91,474,18119,37,650,831
Cash and cash equivalents acquired on amalgamation—54,088,696
Cash and cash equivalents at the end of the year23,95,706,71221,91,474,181
03

Valuation Frameworks

▢ excludedSOTP · P/ABV
SOTP build▢ excluded
ComponentStakeBasisVal/sh ₹
Core bank (standalone)—FY26 EPS ₹48.51 × P/E 15×727.65
Subsidiaries (attributable mkt value)
HDFC Life Insurance50.21%Mkt val ₹1,23,812 Cr~40
HDFC Asset Management52.37%Mkt val ₹1,08,110 Cr~37
HDB Financial Services74.12%Mkt val ₹53,499 Cr~26
HDFC Securities94.01%Mkt val ₹15,000 Cr~9
HDFC ERGO General Ins.50.33%Mkt val ₹25,000 Cr~8
Total subsidiary value/sh120.21
Holdco discount on subs15% (base)−18.03
SOTP fair value (base)830
Bear ₹730 (P/E 13×, 17% disc.) · Bull ₹929 (P/E 17×, 13% disc.) · 12-mo RI target: ₹1,060
Multiples & bands▢ excluded
Forward P/ABV band · avg ±1 SD
Two-variable sensitivity — Residual Income (g × Ke)▢ excluded
Intrinsic value (₹/share) = f(terminal growth g × cost of equity Ke) — Base: g=6.0%, Ke=9.14%
g ↓ / Ke →8.5%9.0%9.5%10.0%10.5%11.0%
4.0%1,1771,046957892842802
4.5%1,2751,106995916857811
5.0%1,4031,1771,038942872820
5.5%1,5801,2641,088974893834
6.0%1,8441,3721,1451,012922855
CAPM Ke base = 6.5% Rf + 0.48β × (12%−6.5%) = 9.14%. Bear Ke 11.0%, Bull Ke 9.0%. Values above CMP (₹749) in most combinations.
P/BV model — Book Value per Share projection▢ excluded
ROE Method
BVPSt+1 = BVPSt × (1 + ROE × r)
Retention ratio r = ~75%
ROE '2714.0% ROE '2814.0% ROE '2914.5%
Why these ROE assumptions? Dividend payout has historically been ~25%, implying ~75% retention. ROE is held at 14.0% for FY27–28, then steps up to 14.5% in FY29 as HDFC Ltd merger synergies fully materialise — driven by improved funding mix, deposit accretion, operating leverage from scale, and normalization of the enlarged balance sheet.
Book Value per Share — Historical & Projected (₹)
Mar-22Mar-23Mar-24Mar-25Mar-26 Mar-27E Mar-28E Mar-29E
BVPS (₹) 222258294329363 401 443 491
ROE × Retention —16.19%13.79%11.74%10.40% 10.50% 10.50% 10.88%
▶ Show balance sheet support data (₹ Cr)
Mar-22Mar-23Mar-24Mar-25Mar-26
Total Assets21,22,93425,30,43240,30,19443,92,11049,08,041
Total Liabilities18,75,60822,40,99535,73,79838,70,32143,26,527
Book Value2,47,3262,89,4374,56,3965,21,7895,81,514
Shares outstanding (Cr)1,1121,1201,5521,5881,603
Price Scenarios — BVPS × P/BV Multiple (₹)
▼ Bear Case
P/BV holds at 2.0×
YearP/BVPrice
Mar-27E2.0×₹802
Mar-28E2.0×₹886
Mar-29E2.0×₹982
◆ Now / Base
P/BV stays at 2.08× (current low)
YearP/BVPrice
Mar-27E2.08×₹834
Mar-28E2.08×₹921
Mar-29E2.08×₹1,022
▲ Bull Case
P/BV re-rating to 2.6×
YearP/BVPrice
Mar-27E2.2×₹882
Mar-28E2.4×₹1,063
Mar-29E2.6×₹1,277
Bull case re-rating is supported by improving ROE trajectory, normalization of post-merger profitability, strong asset quality, and sustained double-digit growth in book value.
Sensitivity — Target Price at Mar-29E (₹)
P/BV multipleTarget Price
1.9×933
2.0×982 ← Bear
2.1×1,031
2.08×1,022 ← Base
2.2×1,080
2.3×1,130
2.4×1,179
2.5×1,228
2.6×1,277 ← Bull
P/E model — EPS projection via ROE × BVPS▢ excluded
ROE × BVPS Method
EPSt = ROEt × BVPSt
BVPS projections and ROE assumptions are shared with the P/BV model above (BVPS'27: 401, '28: 443, '29: 491; ROE: 14% / 14% / 14.5%).
How EPS is projected EPS is derived by multiplying the projected BVPS (from the ROE retention model) by the forward ROE assumption. This ties EPS growth directly to book value compounding rather than standalone earnings forecasts, ensuring consistency between the P/BV and P/E frameworks. The current P/E of 15.25× serves as the base — below the historical average — reflecting the post-merger re-rating opportunity.
EPS — Historical & Projected (₹/share)
Mar-22Mar-23Mar-24Mar-25Mar-26 Mar-27E Mar-28E Mar-29E
EPS (₹) 34.3141.2242.1646.2649.39 56.12 62.01 71.21
Source Reported ROE×BVPS ROE×BVPS ROE×BVPS
Price Scenarios — EPS × P/E Multiple (₹)
▼ Bear Case
P/E holds at 15×
YearP/EPrice
Mar-27E15×₹842
Mar-28E15×₹930
Mar-29E15×₹1,068
◆ Now / Base
P/E stays at 15.25× (current)
YearP/EPrice
Mar-2615.25×₹753
Mar-27E15.25×₹856
Mar-28E15.25×₹946
Mar-29E15.25×₹1,086
▲ Bull Case
P/E re-rates to 22×
YearP/EPrice
Mar-27E17×₹954
Mar-28E19×₹1,178
Mar-29E22×₹1,567
Sensitivity — Target Price at Mar-29E vs P/E Multiple (₹)
P/E multipleTarget Price
14×997
15×1,068 ← Bear
16×1,139
15.25×1,086 ← Base
17×1,211
18×1,282
19×1,353
20×1,424
21×1,495
22×1,567 ← Bull
04

Growth & Margin Analysis

▢ excluded
Margin trajectory▢ excluded
MarginsFY24FY25FY26EFY27EFY28E
NIM3.00%3.13%2.94%NANA
ROE16.88%14.30%14.09%~14.0%NA
Cost-to-IncomeNANANANANA
NIM trajectory
Growth rates▢ excluded
YoY growthFY24FY25FY26 (actual)FY27EFY28E
Advances (retail)NANA+6.5%NANA
Advances (SME)NANA+17.2%NANA
Advances (corporate/wholesale)NANA+13.0%NANA
Revenue (5-yr avg)22.1% · 5-yr profit CAGR 19.0% · 5-yr EPS CAGR 11.4%
05

Risk & Capital Structure

▢ excluded
Asset quality▢ excluded
MetricFY24FY25FY26 (actual)FY27E
GNPA %NA1.33%1.15%NA
NNPA %NANA0.38%NA
PCRNANA67.86%NA
Slippage ratioNANANANA
Credit cost (Q4 FY26)NANA0.35%NA
ROE stress scenarios▢ excluded
Justification: Higher NPAs ⇒ Higher provisions ⇒ Lower ROE.
Scenario assumptions — ROE FY27–29
ScenarioROE FY27–29
Base14.00%
Mild Stress13.00%
Severe Stress12.00%
Historical ROE % & NNPA — context for stress calibration
Mar-17Mar-18Mar-19Mar-20Mar-21 Mar-22Mar-23Mar-24Mar-25Mar-26
ROE % 17.95%17.87%16.50%16.40%16.61% 16.66%16.96%16.88%14.30%14.09%
NNPA % 0.330.400.390.360.40 0.320.270.330.430.42
Capital & liquidity▢ excluded
MetricFY24FY25FY26 (actual)FY27E
CAR / CRARNANANANA
CET-1NANANANA
LCRNANANANA
CD ratio (LDR)NANANANA
Risk → mitigation▢ excluded
Integration & execution risk. Merger raised balance-sheet complexity. Sustained ROE compression from 14%→12% could reduce RI valuation by ~20–30%. Mitigated by branch expansion and deposit gathering.
Asset-quality (credit) risk. Economic slowdown or geopolitical shock (Iran–Israel conflict, crude oil) could lift slippages. GNPA 0.4%→1.2% would drag ROE to ~12%. Historical NPA range FY17–26: 0.27%–0.43%.
ESG & reputational risk. Non-executive chairman resignation raises governance concerns. "Dubai matter" adverse development could invite regulatory scrutiny and weaken stakeholder confidence.
Interest-rate risk. Escalating geopolitical tension may keep RBI stance tight, pressuring funding costs. A 10–20 bps NIM contraction could weigh on earnings and compress valuation.
06

Business Granularity

▢ excluded
Advances / loan-book mix▢ excluded
SegmentMix %YoYYield
Retail
Retail advancesNA+6.5%NA
MortgagesNANANA
Personal loansNANANA
AutoNANANA
Credit cardsNANANA
Wholesale & SME
Corporate / wholesaleNA+13.0%NA
SME / business bankingNA+17.2%NA
Product mix shift (bps)
Deposits & branch productivity major gap — added▢ excluded
MetricFY24FY25FY26ENotes
CASA ratio (Mar-26)NANA34.1%cost-of-funds driver
CASA per branch (₹ mn)NANANANA
Deposits per branch (₹ mn)NANANANA
Business per employee (₹ mn)NANANANA
Profit per employee (₹ mn)NANANANA
Branch break-even (vintage)NANA
Cross-sell & customer economics▢ excluded
Products / customerNAnot in source
Subsidiary PAT — AMC (FY26)~₹2,860 CrHDFC AMC
Subsidiary PAT — HDB (FY26)~₹2,540 CrHDB Financial
Subsidiary PAT — Life (FY26)~₹1,910 CrHDFC Life
07

Industry & Macro

▢ excludeduniversal gap — added
Sector overview / TAM▢ excluded
Banking-sector backdrop
System credit growth 12–14%; private-bank share gains continue. Formalisation + digital rails expand addressable deposit pool. HDFC Bank's borrowings actively reduced from ₹6.62 lakh Cr to ₹5.48 lakh Cr as legacy HDFC Ltd debt is repaid — a key driver of NIM recovery. DII holding risen every quarter of FY26 (35.77%→40.14%) while FII has eased (48.84%→44.05%), indicating domestic-led ownership rotation.
System credit vs deposit growth
Regulatory backdrop▢ excluded
Tailwinds
• Repo-cut cycle → funding-cost relief
• Priority-sector flexibility via PSLCs
• Digital-banking unit guidelines
Headwinds
• Draft LCR norms (higher run-off factors)
• Project-finance provisioning draft
• Deposit-insurance premium revision
Cycle positioning▢ excluded
Mid-cycle: credit costs near trough (0.35% Q4 FY26), NIM trough visible at 2.94% (FY26). Rate cycle turning — repo-cut cycle to provide funding-cost relief. Merger integration enters recovery phase; ROE expected at 14.0% FY27–28 and 14.5% FY29. Bear/Base/Bull RI intrinsic values: ₹622 / ₹1,063 / ₹1,222. Valuation only collapses toward current price (₹749) when Ke is stressed to 10.5–11% range.
08

Peer Comparison

▢ excludedtwo-table format
Valuation multiples (FY26E)▢ excluded
BankCMP (₹)P/E (×)P/ABVDiv YldMkt Cap (₹ Cr)BV (₹)
HDFC Bank747.0515.1NA1.74%11,49,748377.8
ICICI Bank1,262.1016.7NA0.87%9,04,569503.3
Axis Bank1,272.3015.0NA0.08%3,95,961687.2
Kotak Mahindra377.4519.8NA0.13%3,75,579182.1
IDBI Bank73.088.5NA2.87%78,61163.8
Federal Bank304.1517.3NA0.39%74,986162.5
Yes Bank23.3020.8NA0.00%73,12916.3
SBINA10.8NA1.77%NANA
Operational KPIs (FY26E)▢ excluded
BankRoA (5yr avg)RoERoCENIMGNPANNPAPCRCASA
HDFC Bank1.87%13.8%7.04%3.53%1.15%0.38%67.9%34.1%
ICICI Bank1.98%16.1%7.20%4.32%1.44%0.33%75.8%38.6%
Axis Bank1.45%13.2%6.24%~3.9%1.23%0.37%72%41.0%
Kotak Mahindra2.45%11.2%6.93%~4.7%1.20%0.25%~79%43.0%
SBI~1.02%15.4%6.13%n/a1.49%0.39%74.4%39.5%
09

Sector-Specific KPIs

▢ excluded
Banking KPI grammar▢ excluded
Branches (Mar-26)9,689+234 YoY
ATMs (Mar-26)21,172+33 YoY
Digital txn mix (FY25)97%▲
CASA ratio (Mar-26)34.1%deposit mix
Cards in-forceNAcredit
Yield on advancesNAnot in source
RoRWANAnot in source
Deposit betaNAnot in source
Cross-sector KPI mapping▢ excluded
SectorHeadline driverSector-specific KPIs
BanksNIM × asset qualityCASA, LCR, GNPA, PCR, CAR, P/ABV
NBFCsSpread × AUM growthAUM, Spread, Borrowing mix, P/BV
IT ServicesCC growth × marginCC growth, Utilisation, Attrition, TCV
HotelsRevPAR × occupancyRevPAR, ARR, Occupancy, EV/EBITDA
AutoVolume × ASP mixUnits, SUV mix, Capacity util., P/E
Capital GoodsOrder book × executionOrder book, Book-to-bill, WC days
10

Latest Quarterly Update

▢ excludedQ4FY26
Result snapshot vs estimates▢ excluded
Metric · Q4FY26ActualEst.Var.YoY
NII (₹ bn)NANANANA
PPoP (₹ bn)NANANANA
Provisions (₹ bn)NANANANA
PAT (₹ bn)NANANANA
NIM (on IEA)3.53%NANANA
GNPA %1.15%NANAimproved from 1.33%
NNPA %0.38%NANANA
Credit cost ratio0.35%NANANA
Change in estimates major gap — added▢ excluded
Old FY27ENew FY27EChangevs Consensus
EPS (₹, standalone)NA56.12NANA
NIMNANANANA
Credit costNANANANA
Target price (RI-led)NA1,060NANA
Concall highlights▢ excluded
Operational (Q4 FY26)
• NIM (IEA basis): 3.53% · NIM (total assets): 3.38%
• GNPA improved to 1.15% from 1.33% a year earlier
• Credit cost: 0.35% · Standalone borrowings cut ₹6.62 lakh Cr → ₹5.48 lakh Cr
Guidance / strategy
• HDB Financial Services IPO progressing
• Branch network expanded to 9,689 (+234 YoY); ATMs 21,172
• 97% of financial transactions digitally enabled (FY25)
11

ESG & Corporate Governance

▢ excluded
Governance review▢ excluded
• Non-executive Chairman resigned — governance and succession risk flagged as a key investment risk
• "Dubai matter": adverse development could damage reputation and invite regulatory scrutiny
• Bank continues to invest in governance frameworks, cybersecurity and digital infrastructure
• Board independence and RPT details: NA (not available in source)
Climate & lending▢ excluded
• Climate stress on mortgage collateral, carbon intensity of lending book, green-finance share of advances: NA (not available in source document)
12

Self Research Points

▢ excludedyour notes
Datewise research log▢ excluded
Add a dated observation, channel check, or chart clip.
13

Analyst Notes & Downloads

▢ excluded
Report & model repository▢ excluded
📄 Initiating Coverage — full (44 pp)PDF
📄 Q4FY26 Result UpdatePDF
📊 Earnings model (FY24–28E)XLSX
📄 SOTP build & sensitivityPDF
Recommendation history▢ excluded
DateRatingTP ₹
2-Jun-26BUY1,060
NANANA
NANANA
NANANA
iWireframe note: lo-fi structural sketch. "Download PDF" prints the report — sidebar & input UI drop out, each section starts a new page, and any unchecked section/subsection is excluded.