Anand Rathi has set a target price of Rs 966 for HDFC Bank, noting that recent stock corrections have made the valuation more attractive. However, the brokerage cautions that the bank's loan growth continues to trail competitors like ICICI Bank and Axis Bank, while net interest margins and funding costs remain key areas for investors to monitor.
Brokerage firm Anand Rathi has set a target price of Rs 966 for HDFC Bank, suggesting that the recent decline in the stock price has balanced out several prevailing risks. The report uses a valuation method that looks at the core banking business and the value contribution from its various subsidiaries, setting the price target based on projected performance for the 2029 fiscal year.
While the brokerage sees value at current price levels, it highlighted several operational hurdles that investors should watch. The bank recorded a loan growth of 16.4% year-on-year, but this pace remains slower than several major private sector competitors, including ICICI Bank, Axis Bank, and Kotak Mahindra Bank. This slower growth in loans compared to peers is a point that analysts are closely tracking.
Profitability also faces pressure. The bank’s net interest margins—the difference between the interest earned on loans and the interest paid on deposits—contracted by 8 basis points in the recent period. This was largely linked to FCNR (Foreign Currency Non-Resident) deposit flows. A significant challenge for the bank is the funding gap, as the growth in deposits, particularly low-cost CASA (Current Account Savings Account) deposits, is not keeping pace with the growth in credit. The brokerage suggests that closing this funding gap will be a process that takes several quarters to resolve.
Leadership transition remains a factor in the company’s outlook. With the appointment of Anup Bagchi as Managing Director, the firm expects improved stability. However, the potential departure of experienced leadership figures, such as the early cessation request by Kaizad Bharucha, presents a risk of temporary disruption. The report notes that the current market valuation appears to have already factored in these personnel changes and operational challenges.
For investors, the long-term potential of the bank is balanced against these short-term pressures. The key monitorables for the coming quarters will be the bank's ability to narrow the funding gap, improve its CASA ratio, and demonstrate that loan growth can stabilize at competitive levels. The ability of the new leadership to navigate these transitions and maintain margin stability will be essential for the stock's future performance.