Axis Bank Share Price Target at Rs 1,500: Kotak Securities
Kotak Institutional Equities has reaffirmed its BUY recommendation for Axis Bank, setting a fair value target of Rs 1,500 per share—signaling strong conviction in the bank’s ability to deliver robust returns. Despite recent margin compression and elevated credit costs, Axis Bank’s underlying fundamentals remain sound, with prudent risk management, improving asset quality, and a strategic tilt toward high-yield segments. As the valuation gap with larger peers narrows, the bank emerges as a compelling opportunity for investors seeking value in India’s private sector banking landscape.
Axis Bank: Navigating Headwinds, Poised for Re-Rating
Axis Bank’s fiscal year 2025 encapsulated a period of transition, marked by both challenges and opportunities. While the bank experienced margin compression and higher credit costs, its core strength and adaptability stood out. Kotak Institutional Equities continues to advocate for Axis Bank, maintaining a BUY rating and a fair value of Rs 1,500. The brokerage forecasts a medium-term Return on Equity (RoE) of approximately 15%, underpinned by enhanced asset quality, disciplined capital management, and a strategic focus on high-yielding business segments. The persistent discount to HDFC Bank and ICICI Bank is expected to diminish, reinforcing Axis Bank’s appeal for value-oriented investors.
Key Investment Thesis: BUY Recommendation with Rs 1,500 Target
The investment case for Axis Bank is anchored in the bank’s demonstrated ability to weather cyclical headwinds while maintaining operational rigor. Kotak Institutional Equities’ BUY call and Rs 1,500 fair value suggest a meaningful upside from the prevailing market price of Rs 1,174. The stock trades at 2.0x book value and about 14x FY2027E earnings per share (EPS), reflecting confidence in Axis Bank’s capacity to deliver sustainable RoE expansion and benefit from an industry-wide re-rating.
FY2025 Performance: Subdued Yet Resilient
Axis Bank’s FY2025 results reveal a nuanced picture. The year was characterized by a 5 basis point year-on-year decline in net interest margin (NIM) to 3.5% and a doubling of credit costs, primarily due to stress in the retail unsecured loan segment. These factors led to a compression in RoE by nearly 200 basis points. Nonetheless, the bank’s net non-performing loans (NPL) to net worth ratio remained at a historical low of 2%, and its subsidiaries, particularly those linked to capital markets, delivered robust performances.
Operational Metrics and Valuation Table
A closer look at Axis Bank’s key financial metrics and valuation parameters reveals the following:
| Metric | FY2025 | FY2026E | FY2027E |
|---|---|---|---|
| EPS (Rs) | 85.1 | 86.1 | 99.9 |
| P/E (x) | 13.8 | 13.6 | 11.7 |
| P/B (x) | 2.1 | 1.8 | 1.6 |
| BVPS (Rs) | 571.4 | 643.6 | 725.8 |
| RoE (%) | 15.9 | 14.0 | 14.4 |
| Dividend Yield (%) | 0.1 | 1.1 | 1.3 |
Asset Quality: Peak Stress Likely Behind
The past fiscal year witnessed a spike in slippages and credit costs, yet Axis Bank’s proactive provisioning and tightened credit filters suggest that the worst is likely in the rearview mirror. Slippages increased to around 2%, with credit costs at 0.8% of loans. Notably, the retail unsecured loan book—where most of the stress originated—has seen a marked improvement in origination quality among recent cohorts. With sector-wide tightening of credit norms, the bank is poised for lower slippages and credit costs in FY2026 and beyond.
Loan Book Dynamics: Balanced Growth Ahead
Axis Bank’s loan book expanded by 8% year-on-year in FY2025, propelled by a robust 13% growth in SME loans. Retail loans continued to represent 60% of the total portfolio. The bank’s focus on high-yielding segments, especially in the mid-market and SME domains, is designed to optimize returns on risk-weighted assets. The share of unsecured loans remains prudent at approximately 12% of the retail portfolio, underscoring a cautious approach. Management projects loan growth to accelerate to 12-13% CAGR through FY2028, with a more balanced contribution from both retail and non-retail segments.
Cost Structure and Efficiency: Investments for the Future
Operating expenses increased at a moderate 7% year-on-year, with significant investments directed toward technology and growth initiatives. While the cost-income ratio is currently higher than some peers, normalization is anticipated as integration costs from the Citi acquisition recede and digital investments start delivering operational leverage. The bank has ramped up branch expansion while keeping employee costs under control—average staff age stands at 35 years, and ESOP issuance is on a declining trajectory.
Subsidiaries: Capital Markets and AMC Shine
Axis Bank’s subsidiaries—Axis Finance, Axis Capital, Axis AMC, and Axis Securities—have emerged as strong contributors, collectively adding an estimated Rs 100 per share to overall valuation. The capital markets businesses thrived amid buoyant market conditions, while Axis AMC posted a 15% CAGR in assets under management (AUM) over two years. Axis Finance is strategically shifting its loan mix toward retail and MSME, targeting a sustainable Return on Assets (RoA) of 2.5%.
Capital Position: Fortress Balance Sheet
The bank’s capital adequacy remains formidable, with a CET-1 ratio of 14.7% and tier-1 capital at 15.1% as of FY2025. Slower loan growth, robust internal accruals, and a conservative dividend policy have enabled Axis Bank to build a strong capital buffer. There is no immediate need for capital raising, and risk-weighted asset growth is expected to align with loan growth as the lending book stabilizes.
Valuation Gap with Peers: Opportunity for Re-Rating
Kotak Institutional Equities anticipates that the valuation discount to HDFC Bank and ICICI Bank will narrow as Axis Bank continues to demonstrate improving profitability and asset quality. The current P/B and P/E multiples are attractive, and a combination of re-rating and RoE accretion could catalyze outperformance. The brokerage’s sum-of-the-parts (SoTP) valuation allocates Rs 1,379 per share to the standalone bank and Rs 113 per share to subsidiaries, totaling Rs 1,492, closely aligned with the Rs 1,500 fair value target.
Stock Levels and Investor Guidance
- Current Price: Rs 1,174
- Fair Value Target: Rs 1,500
- 52-Week Range: Rs 934 – Rs 1,340
- Upside Potential: ~28%
Investors are encouraged to accumulate Axis Bank at current levels, with an eye toward a medium-term re-rating as sector headwinds subside and operational performance strengthens. The risk-reward profile remains particularly attractive for those seeking exposure to India’s dynamic private banking sector.
Strategic Takeaways and Broader Implications
Axis Bank’s journey underscores the importance of adaptability and prudent risk management in navigating cyclical volatility. The bank’s focus on high-yielding segments, disciplined capital allocation, and strategic investments in technology position it as a frontrunner for re-rating among large private sector banks. For investors, the actionable takeaway is clear: Axis Bank offers a compelling blend of value and growth, supported by robust fundamentals and a credible roadmap for sustained profitability. As India’s financial sector continues to evolve, Axis Bank’s trajectory will be closely watched as a bellwether for broader industry trends.
