HDFC Bank Company Update ; Upgrade in earnings – rating changed to ACCUMULATE ; ACCUMULATE ; Target : Rs1,500

HDFC Bank Company Update ; Upgrade in earnings – rating changed to ACCUMULATE ; ACCUMULATE ; Target : Rs1,500

HDFC Ltd is likely to issue non-convertible debentures (with attached warrants for conversion into equity shares) worth Rs40bn. The money raised through the issue may be used to convert the warrants (26.2mn) that HDFC Ltd taken in HDFC Bank. The warrants are due for conversion in December 2009 with conversion price of Rs1,530.

We are upgrading our estimates for HDFC Bank for FY10 and FY11 EPS by 2.5% each and that of ABV by 17% and 14% respectively. Driven by the upgrades we are upgrading our price target on the stock to Rs1500. However, with the stock trading near to our price target we are downgrading our rating on the stock to ACCUMULATE. At the current valuations, the stock is quoting at 3.2x FY10E ABV and 2.7x FY11E ABV.