Market expert Sameer Dalal from Natverlal & Sons Stockbrokers believes the answer is clear—this is not the time to retreat.
“So, no, I would never stay away from an HDFC Bank. I am actually one in favour of… For me, it is a screaming buy opportunity in the market. Look, you do not get these opportunities quite often. And as long as there is nothing wrong with the book in the sense that we are not going to see a sudden spike in the NPA numbers, I do not see why one should shy away,” Dalal said.
Governance Concerns Add to Market Jitters
The recent resignation of the bank’s former chairman has added a layer of discomfort among investors, especially as markets remain fragile. Dalal, however, questioned the manner in which the situation unfolded, suggesting that greater transparency could have helped avoid panic.
“If the older chairman, the chairman who retired, had his grievances, he should have pointed them out to the shareholders—that is you, me, and everybody else—saying that this is how the bank is being run, which I am not happy with, and if he thought he was in the right, he should have asked the shareholders to vote alongside him rather than taking a stance of a resignation,” he said.
He further added, “The shareholders at the end of the day are supreme… But the fact is that when the time is bad, the markets are falling, there is panic and fear, you add on to the fear by just leaving an open-ended statement and walk away. It is not a nice thing to have done, especially to the shareholders that you represent.”
Valuations: Discounted or Justified?
Despite the noise, Dalal pointed to valuations as a compelling factor supporting his bullish stance.
“But having said that, HDFC Bank is trading at 1.6 times price to book after adjusting for all its investments in its subsidiaries. The bank continues to grow. Yes, growth is slower, it is happening at 10% to 12% at the moment. We believe it will accelerate,” he noted.
He framed the broader issue beyond just one bank, tying it to the overall growth trajectory of the economy.
“Look, you also got to realise that growth in the entire lending space has slowed down because corporate growth is not really happening, but that eventually has to return… So, if the corporate side recovers, HDFC with its low-cost funding, with its reach… will come back, will grow at a quicker pace and then it will get rerated,” Dalal said.
The Growth Debate: A Sector-Wide Reality
One of the key concerns flagged by market participants remains the bank’s moderating growth and elevated loan-to-deposit ratio. However, Dalal believes this is not unique to HDFC Bank but reflective of a broader industry trend.
“So, you are right on that front that deposit growth has not been coming and because of which loan to deposit has moved up. But you also got to realise that post the merger with HDFC Limited… they had a lot of bonds in HDFC and all of those bonds need to be repaid to substitute it with low-cost borrowing,” he explained.
According to him, the bank has sufficient levers to manage funding without significantly impacting margins.
“Now, for the bank it becomes very easy to raise deposits at slightly higher rate… HDFC Bank will get the funds that they require from the growth perspective without really hurting their total borrowing cost,” he said.
Industry Context and India’s Growth Premium
Dalal also widened the lens to address a more fundamental question—whether India’s premium valuations are justified in the absence of strong growth.
“The entire space if you look at it, it is the smaller banks that have been able to grow at a faster clip… but all of your others… are in the low-teens,” he observed.
This leads to a bigger macro question.
“Is India’s high valuation multiple justified given the fact that we keep hoping that growth comes… or do we believe that the growth will come and that is why these higher valuation multiples can be sustained?” he asked.
Dalal remains optimistic, pointing to structural tailwinds.
“We believe that the growth engines of India will start firing and then these valuations start looking more justified,” he said.
A Long-Term Opportunity?
From a historical standpoint, Dalal argues that current valuations offer a meaningful margin of safety.
“In fact, if you look at on its own historical basis, HDFC used to trade at about three-and-a-half, four times, it is trading at two, so you are getting it at a mighty discount. I am not saying that on the consol basis two is cheap, but it is not expensive for the likes of an HDFC Bank who can still grow at 20%,” he said.
The Bottom Line
While near-term concerns around growth, deposits, and sentiment continue to weigh on the stock, the longer-term narrative remains intact for believers in India’s structural growth story. For investors willing to look beyond current uncertainties, Dalal’s message is unambiguous: this may well be a moment of opportunity rather than hesitation.
