Macquarie Capital Securities India has said that it is downgrading HDFC to 'underperform' from earlier rating of outperform mainly due to the bank's aggressive accounting practices from the last two years.

Mr Suresh Ganapathy and Mr Parag Jariwala of Macquarie said that the bank's quality of earnings and ROE were changed due to corporate book and aggressive accounting practices. Macquarie has also reduced HDFC's target price by 30 per cent to Rs550.

''We believe a structural de-rating is likely because the quality of earnings and ROE (return on equity) reported is being driven more by its corporate book and aggressive accounting practices,'' they said.

The report said that the earnings were inflated by 38 per cent and 24 per cent, respectively in the previous two years. It said that reported return on equity would have been lower by 600 and 400 basis points at 16 per cent and 18 per cent, respectively. HDFC reported a net profit of Rs4,122.62 crore in FY12, up from Rs3,534.96 crore in FY11.

HDFC responded by saying that the brokerage firm has not verified the facts and statements.