Emkay recommends "Buy" on HDFC Bank
HDFC Bank plans to issue 100 million RSUs (Restricted Stock Units) at a deep discount instead of ESOPs (employee stock ownership plans) to contain equity dilution or employee retention. As far as the merger is concerned, HDFC Bank and HDFC Ltd will have time (2-3 years) to moderate regulatory drag by building buffers in both entities. We expect pro-forma average RoE (average return on equity) for HDFC Bank (merged) at approximately 16.6% over FY24-25E (2023-24-2024-25 estimates), which will still be reasonable versus large peers. We cut standalone bank target price multiple to 3.2 times on FY24E ABV (3.5x on 9MFY24E ABV earlier) and value the bank at Rs 1,950 (Rs2,050 earlier), including subsidiaries at Rs 78. We retain long-term 'Buy' on the stock given recent correction.
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