HDFC Bank Shares Fall By Over 3% As Lender Forecasts Hit To Key Financial Metrics; Here's Why

The shares of HDFC Bank contracted by over 3% to the day’s low at Rs 1,575 per share on Wednesday, after the private lender said its newly completed merger with HDFC Ltd would hit some key financial metrics.

HDFC Bank, along with Reliance Industries and Infosys dragged domestic indices in red in the early morning trade on Wednesday. 

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HDFC stock declined as a couple of brokerages reduced the target prices. Nomura has lowered the stock rating to 'Neutral' and reduced the target price, while domestic brokerages Kotak Institutional Equities and Investec have also decreased their price targets for the stock.

After the investor meeting, Nomura revised its price target to Rs 1,800, assessing the stock's value at 2.5 times the Book Value Per Share (BVPS) projected for June 2025 (2.8 times for ICICI), with subsidiaries contributing Rs 201 per share. Kotak slashed the target to Rs 1,850 from an earlier target of Rs 1,925 though it maintained a buy stance.

"There is a reduction in net worth to account for policy, accounting alignments and dividend payout. The NPL in the parent entity is higher than expected but further negative surprises should be negligible. Re-rating is some time away as the bank has to work through the NIM transition and build its thesis of differentiation, which we are still less certain about," the brokerage was quoted as saying by The Economic Times.

HDFC was also the top loser in Nifty 50 on Wednesday. Around 1.6 crore shares changed hands on the NSE, as of 9:50 am. 

Investor sentiment took a hit as HDFC Bank shares dipped amidst robust trading volume, largely attributed to the management's disappointing guidance on key metrics, including margins and net worth.

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On the other hand, Investec maintained a 'Hold' on the counter while cutting the target price to Rs 1,690 from Rs 1,735. "BVPS impact of 5% marginally higher than expectation of 3%," the brokerage said in a note.