HDFC Bank: FPIs reduced their stake in the most valuable lenders by 446 bps in Q4; What’s next?

HDFC Bank: Foreign Portfolio Investors (FPI) dumped shares of HDFC Bank Ltd in the last quarter, the latest dividend data available on the stock exchange showed. 2,663 FPIs in total held 3,14,19,30,208 shares or 47.83 percent in the third most valuable company on Dalal Street at the end of the March quarter, the data showed

This is down 446 from their 52.29 percent stake in the largest private equity fund at the end of the December quarter. FPI held a 52.11 percent stake in September and a 33.36 percent stake in the lender at the end of the June 2023 quarter, according to agency database ACEquity.

The counter saw a sell-off in FPIs as the lender’s March quarter results raised concerns over margins. Higher operating expenses (profit-to-earnings ratio: 40 percent in Q3FY24), lower yields (due to higher household expenses of HDFC Ltd), and a marginal decline in ROA (percent). of 2 percent in 3QFY24), have made the stock underperform so far

Shares of HDFC Bank have fallen 11 percent so far in 2024. This contrasts with a flat BSE Bankex over the same period. That said, many traders believe the worst is over for the stock market.

We have a BUY rating on the stock with a target price of Rs 2,072 on a SOTP basis, which is 2.8 times the FY26E P/ABV value of independent banks, Arihant Capital Markets said on Wednesday, 2017.

Institutional investors, Nomura India said in a recent note, most of them believe that the worst could be after HDFC Bank’s share price. Most investors are also comfortable with the prospect of youth loan growth in the near medium term, as the bank is known for gradually reducing its loan portfolio (110 percent from 3QFY24), according to a foreign trader.

Investors’ argument here is based on RoA, which should have a gradual growth trajectory as the financial mix gradually improves. While we acknowledge that HDFC Bank stock has declined (our target price has a Neutral rating of Rs 1,625). We don’t. looks at a strong case for meaningful growth, which we believe should be sustainable in the medium term, said Nomura India.

The bank recently reported deposit growth of 7.5 percent (26.4 percent y-o-y) in the March quarter at Rs 23.8 lakh crore 2024. InCred Equities has stated that the bank is focusing on rising cash deposits in-store, with deposits increasing by 6.9 percent quarter-on-quarter (27.8 percent year-on-year) to Rs 12.8 lakh crore, while CASA shares are gradually improving to 38.2 percent, compared to 37.7 percent in December 2023 (44.4 percent last year).

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“HDFC Bank is our highest confidence ADD with a target price of Rs 2,000 as we continue to believe that HDFC Bank is well positioned due to its improved penetration in terms of portfolio granularity and commanding loan pricing. We look forward to it.” HDFC Bank will achieve a two percent ROA and a 16 percent return on the equity issue. We are thereby.” The independent bank is valued at 2.7x FY25F BV and its subsidiaries are valued at Rs200/share,” it said.