HDFC Buzz: LIC To Acquire 9.99% Stake In HDFC Bank; Should You Buy This Stock Too? 22-40% Rise Estimated Ahead

India's largest life insurer, LIC India has received the Reserve Bank of India (RBI) approval for buying a 9.99% stake in the country's largest bank in terms of market share, HDFC Bank. The private bank has been facing the wrath of bears for the past couple of days after Q3FY24 results. While LIC is set to acquire a massive stake in HDFC Bank, what about investors? Should investors also place their bets in the latest bearish-trending HDFC Bank?

On January 25, RBI addressed to Life Insurance Corporation of India ("LIC") and accorded its approval to LIC for acquiring aggregate holding up to 9.99% of the paid-up share capital or voting rights of HDFC Bank.

As per the regulatory filing, LIC has been advised by RBI to acquire the aforesaid major shareholding in the Bank within one year i.e. by January 24, 2025. Further, LIC must ensure that the aggregate holding in the Bank does not exceed 9.99% of the paid-up share capital or voting rights of the Bank at all times.

On BSE, HDFC Bank's share price ended at Rs 1435.30 apiece, down by 1.41% with a market cap of Rs 10,90,001.31 crore.

After Q3 results, HDFC Bank's market cap dipped below Rs 11 lakh crore. HDFC Bank is the largest bank in India in terms of market share.

During Q3 of FY24, HDFC Bank's net profit came in at Rs 16,372 crore, registering a growth of 33% from Rs 12, 259 crore a year ago same quarter. While its net interest income (NII) saw a growth of 24% YoY to Rs 28,470 crore. While the bank's core net interest margin was at 3.4% on total assets, and 3.6% based on interest-earning assets.

Pre-provision operating profit stood at Rs 2,365 crore, up by 24.3%. In terms of asset quality, gross NPA was at 1.26%, down from 1.34% in Q2FY24. Net NPA came in at 0.31% of net advances by the end of Q3FY24.

Here's what brokerages say about HDFC Bank's share price after Q3 results:

Rs 1,762 Target Price, Potential Upside: 22.8%:

In its research note, LKP Securities said, "HDFC Bank is expected to overcome the merger overhangs gradually led by 1) healthy balance sheet growth, 2) much higher provision than the regulatory requirement in the balance sheet, 3) best in class underwriting and risk management practices. Given these strengths we expect HDFC Bank to remain one of the best among all the lending businesses. Thus, we continue to maintain BUY on the bank with a revised target price of Rs 1762."

Rs 1,896 Target Price, Potential Upside of 32%

Further, BOB Caps in its note said, "We revise our FY24/FY25 PAT estimates by -6%/+1% to bake in the results, besides introducing FY26 forecasts and rolling valuations forward to Mar'26E. This yields a revised SOTP-based TP of Rs 1,896 (vs. Rs 1929), where we value the core business at 2.4x FY26E ABV (vs. 2.9x FY25E ABV) based on the Gordon Growth Model and include Rs 223/sh for subsidiaries. Although the bank's the growth outlook remains healthy, margin improvement would be key to watch."

Rs 1,994 Target Price, Potential Upside of 38.92%

Meanwhile, Nirmal Bang in its note said, "We are valuing HDFC Bank at 2.7x December 2025E ABV as against (2.75x September 2025E P/ABV) and adding subsidiary value per share of Rs 180 we maintain our target price at Rs 1994 and rating as 'BUY'."

Rs 2,000 Target Price, Potential Upside Of 39.34%

On the other hand, Yes Securities maintained an ADD on the stock price, however, has set the highest target price of Rs 2,000 on HDFC Bank among other brokerages.

Analysts at Yes Securities in their report said, "We maintain a less-than-bullish ADD rating with an unchanged price target of Rs 2000: We value the standalone bank at 2.7x FY25 P/BV for an FY24E/25E/26E RoE profile of 16.6/18.0/18.6%. We assign a value of Rs 209 per share to the subsidiaries, on SOTP. We had begun with a less-than-bullish ADD rating for HDFCB in our our Sector Initiation Report dated June 2021 and the stock has been a relative under-performer."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.In advises users to consult with certified experts before making any investment decision.