HDFC Life gets GST demand notice of Rs 942 crore; stock slips 2% but recovers later

HDFC Life Insurance stock declined as much as 2 per cent in the morning deals, touching the day’s low at Rs 616.75 apiece, but recovered much of the losses by 10:00 AM. The stock declined after the company received a Goods and Services Tax (GST) demand notice of Rs 942 crore.

At around 10:00 AM, HDFC Life Insurance shares traded 0.59 per cent higher on the BSE at Rs 630.65 apiece. The scrip snapped a three-session losing streak. The scrip closed 0.56 per cent higher at 630.45 apiece on Monday.

The matter relates to the claiming of an input tax credit against the supply of services, which the Directorate of GST Intelligence (DGGI) believes is ineligible for such claims.

"HDFC Life Insurance Company has received a show cause cum demand notice from the Directorate General of GST Intelligence, Mumbai Zonal Unit, asking the Company to show cause why a tax of Rs 942,18,46,028 pertaining to the period July 2017 to FY 2022 should not be demanded from the Company," HDFC Life said in a regulatory filing.

Stating that the input tax credit (ITC) case is an industry-wide issue, HDFC Life said the company will be taking appropriate steps in due course to reply to the show cause notice and contest the matter.

On June 20, HDFC Life said that the Competition Commission of India had approved HDFC Ltd., one of the promoters of the company, to increase its stake in HDFC Life to more than 50 per cent. In a filing on Friday, HDFC Life said the Insurance Regulatory and Development Authority of India (IRDAI) has granted its approval for the transfer of shares of HDFC Life from HDFC Ltd to HDFC Bank.

Brokerages’ view 

Kotak Securities has given a 'buy' call on HDFC Life Insurance for a target price of Rs 820 apiece, which implies an upside of 30 per cent from Friday’s closing price.

"We find the company investing aptly to grow a lower-ticket business and sustain growth in high-margin retail terms; it seems firmly on track to deliver mid-teen," the brokerage said in its report.

Philip Capital is also bullish on HDFC Life Insurance and has maintained ‘buy’ for a target price of Rs 700 apiece, which translates to an upside of 11.7 per cent from Friday’s closing price.

"Going forward, opex synergies from the merger will be key drivers for margins, in our view. Embedded value grew 5 per cent sequentially. A higher base, inflationary pressure, and the bank’s focus on deposit accretion may pose growth challenges over the next few quarters," the brokerage said in its report.

HDFC Life Insurance share price history 

So far in 2023, HDFC Life Insurance shares have climbed over 10 per cent against the Nifty50’s rise of over 2 per cent. In the last month, the stock has climbed over 6 per cent against the headline index’s rise of nearly 1 per cent.

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