HDFC Bank's Valuation Multiple Hits Decades Low

The bank's merger-era overhang, a muddled performance scorecard and a broader rout in private sector bank stocks have converged to push valuations to levels not seen in a quarter century.

HDFC Bank’s stock has fallen roughly 25% year-to-date and is trading at a price-to-book ratio of around 2×, the lowest level recorded since at least 1999.

An elevated loan-to-deposit ratio carried over from its merger with HDFC Limited, unexplained compression in loan yields, and stalling CASA market share gains despite the bank adding thousands of branches since FY22 have all weighed on investor confidence. Deposit growth and asset quality remain ahead of peers, but management has issued guidance across so many metrics simultaneously — loan growth, LDR, NIM, CASA — that investors have no single benchmark against which to measure a good quarter.