HDFC Life Share Price Target at Rs 870: Ventura Securities

Harish Dhawan 4 April 2025

In an industry defined by evolving consumer awareness, post-pandemic risk aversion, and a growing working-age population, Ventura Securities has issued a bullish ‘BUY’ call on HDFC Life Insurance Co. Ltd. (HDFCLI), setting a 24-month price target of Rs 870, implying an upside potential of 26.7% from the current market price of Rs 687. The research house argues that HDFC Life stands out as a frontrunner in the Indian insurance sector, driven by its diversified product portfolio, sustained growth in new business premiums (NBP), and robust customer retention. With a clear strategy to strengthen its non-linked product base and distribution footprint, HDFC Life is poised for continued outperformance.

Riding the Tailwinds of a Booming Life Insurance Market

India’s life insurance industry, valued at Rs 8.3 trillion in FY24, is set to reach Rs 11.5 trillion by FY28, propelled by heightened risk consciousness post-COVID, favorable demographics, and low insurance penetration.
HDFC Life’s gross premiums are projected to grow at a CAGR of 13.5% between FY24 and FY27, underpinned by a 15.2% CAGR in renewal premiums and 11.4% CAGR in NBP. This strategic positioning in a growth market fortifies its long-term investment thesis.

The underpenetrated Indian market—with an average per capita premium of just $70 versus the global average of $900—offers ample room for expansion, particularly in non-metro regions where insurance literacy is gaining momentum.

NBP Momentum Reinforced by Bancassurance and New Agency Strategy

HDFC Life’s reliance on the bancassurance channel—responsible for nearly 50% of individual NBP—is significantly above the industry average of 30%, thanks to its deep integration with HDFC Bank’s pan-India network.
While the company has historically underperformed in agency distribution (contributing only 11% of total NBP vs 21% industry average), renewed focus on Tier 2 and Tier 3 expansion is expected to unlock further growth.

From FY20 to FY24, HDFCLI’s NBP market share rose from 6.3% to 7.6%, validating the strength of its multichannel approach.

Focus Shifts from ULIP to High-Margin Non-Linked Products

In response to changing consumer preferences, HDFC Life has progressively trimmed its exposure to ULIPs (unit-linked insurance plans) while expanding its footprint in non-linked traditional products, including term insurance and guaranteed return plans.

Non-linked premiums now constitute over 81% of the company’s NBP, compared to 76.3% earlier, offering enhanced predictability, superior margins, and reduced exposure to market volatility.
This shift supports Value of New Business (VNB) growth at a CAGR of 14.7% to Rs 5,278 crore by FY27, with stable VNB margins of ~26%.

Persistency Ratio Signals Strength in Customer Retention

HDFC Life boasts one of the industry’s best persistency ratios, with 13th-month persistency improving to 88% and 61st-month persistency rising from 45% in FY20 to 60% in FY24.
This metric reflects robust customer satisfaction and operational effectiveness, ensuring a higher share of renewal premiums and a stable recurring revenue base. Renewal premium income is forecast to touch Rs 51,182 crore by FY27, growing at 15.2% CAGR.

Sound Financials Back a Strong Investment Case

Ventura estimates PAT will grow from Rs 1,574 crore in FY24 to Rs 2,883 crore in FY27, translating to a 22.4% CAGR. EPS is projected to rise from Rs 7.3 to Rs 13.4 during this period, with return on equity (RoE) improving from 10.7% to 14.7%.

At current levels, the stock trades at 1.9x FY27 P/EV, below its 3-year average of 3.0x. The brokerage values the company at 2.4x FY27 P/EV—a 20% discount to its historical average—highlighting scope for multiple re-rating as fundamentals improve.

Industry-Leading Product Mix Enhances Profitability

HDFC Life’s product mix is more balanced than its peers. While SBI Life and ICICI Prudential derive 67% and 51% of their APE from ULIPs respectively, HDFC Life’s portfolio is spread across ULIPs (31%), non-par products (31%), and a mix of protection, annuity, and group plans (38%).

This diversified approach mitigates concentration risk and aligns with a rising trend of consumers seeking guaranteed returns, simpler structures, and risk protection.

Solid Asset Base and Conservative Investment Philosophy

As of December 2024, HDFC Life manages Rs 3.1 trillion in assets under management (AUM)—a figure projected to climb to Rs 4.1 trillion by FY27. Over 60% of AUM is allocated to G-Secs and AAA-rated debt, reflecting a prudent approach to capital preservation.

This disciplined asset strategy ensures that policyholder funds remain secure while providing sustainable, long-term returns across market cycles.

Technology, Expense Management, and Operating Leverage

Operating expenses are expected to remain range-bound despite business expansion, thanks to investments in digital platforms, automation, and analytics. Opex as a percentage of total income is forecast to stabilize around 20%, down from 21.1% in FY25.

Additionally, employee productivity and commission payouts are being optimized through better agent training and sales process streamlining, offering scope for improved operating margins.