ICICI Securities has recommended a "BUY" for Fedbank Financial Services (Fedfina) with a revised target price of INR 130, down from INR 184. This recommendation comes after a significant Q2FY25, which saw a change in top management and a recent RBI circular emphasizing the consolidation of lending activities under a single entity, particularly affecting product overlaps between Federal Bank and Fedfina.
Despite challenges, including a second consecutive quarter of elevated credit costs, Fedfina has shown resilience, maintaining a gross non-performing loan (GNPL) ratio of less than 1% over the past eight quarters. The firm's current valuation is 1.1 times FY26 estimated book value per share (BVPS), with expectations of improved credit costs in the latter half of FY25. Earnings estimates for FY25 and FY26 have been reduced by 16% and 5% respectively, resulting in a decrease in the price-to-book value multiple from 2 times to 1.5 times based on September 2025 estimated BVPS.
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