DCF Studio

    HDFCBANK.NS · NSI · Financial Services

    HDFC Bank Limited

    Also onConsensus Drift

    Implied value per share

    INR 900.18

    Market price

    INR 731.00

    Implied upside

    +23.1%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    INR 900.18+23.1%
    Exit multiple
    INR 1490.93+104.0%
    Market price
    INR 731.00

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn985bn1971bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 2251.1bnINR 2631.6bnINR 3076.4bnINR 3596.3bnINR 4204.2bn+16.9%
    EBITINR 1094.8bnINR 1279.8bnINR 1496.1bnINR 1749.0bnINR 2044.6bn+16.9%
    NOPATINR 860.0bnINR 1005.4bnINR 1175.3bnINR 1374.0bnINR 1606.2bn+16.9%
    Add depreciation & amortisationINR 66.7bnINR 78.0bnINR 91.1bnINR 106.5bnINR 124.5bn+16.9%
    Less capital expenditureINR -75.0bnINR -87.7bnINR -102.5bnINR -119.8bnINR -140.1bn+16.9%
    Less increase in working capitalINR 203.6bnINR 238.0bnINR 278.3bnINR 325.3bnINR 380.3bn-16.9%
    Free cashflow to firmINR 1055.3bnINR 1233.7bnINR 1442.2bnINR 1686.0bnINR 1970.9bn+16.9%
    Discount factor0.95400.86840.79040.71940.6548-
    Present valueINR 1006.8bnINR 1071.3bnINR 1139.9bnINR 1212.9bnINR 1290.6bn+6.4%
    Present Value Of The ForecastINR 5721.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.601Reported 0.404, pulled toward 1.0 (Blume)
    Cost of equity11.61%Risk-free + beta x equity risk premium
    Cost of debt8.80%Implied cost of debt of 26.6% is not a credible funding cost, so risk-free + 2bp is assumed instead. Interest expense and reported debt are measuring different things - common for banks, whose interest expense includes deposits that total debt excludes.
    Market capitalisationINR 11269.5bn62.9% of capital
    Total debtINR 6643.6bn37.1% of capital, book value as a proxy
    Tax rate21.4%Effective, capped at statutory
    WACC9.87%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 900.18

    66% of EV

    Forecast FCFF, final year
    INR 1970.9bn
    Capex at depreciation, working capital in reinvestment
    INR 1637.3bn
    Less reinvestment at g/ROIC (25.3% of NOPAT)
    INR -414.9bn
    Capitalised
    INR 1222.4bn
    ROIC (WACC floor)
    9.9%
    Terminal value, undiscounted
    INR 17011.7bn
    Terminal value, discounted
    INR 11139.8bn
    Enterprise value
    INR 16861.5bn
    Less net debt
    INR 2993.0bn
    Equity value
    INR 13868.5bn

    Exit at 14.3x EBITDA

    Value per shareINR 1490.93

    78% of EV

    Terminal value, undiscounted
    INR 30910.4bn
    Terminal value, discounted
    INR 20241.1bn
    Enterprise value
    INR 25962.8bn
    Less net debt
    INR 2993.0bn
    Equity value
    INR 22969.8bn

    Spread between methods: 49%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.87%1171.061175.871180.671185.481190.28
    8.87%1016.401020.491024.581028.671032.76
    9.87%893.12896.65900.17903.70907.23
    10.87%792.55795.62798.70801.77804.85
    11.87%708.95711.66714.36717.07719.77

    Outlined: this model. Green text: above today's price of 731.00. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year16.9%12.8%-4.1pp
    EBIT margin48.6%40.5%-8.1pp
    Discount rate9.9%11.7%+1.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.