HDFC Life: Free Cash Flow Valuation

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Case

Reference no. W34075

Subject category: Finance, Accounting and Control

Authors: Debasish Maitra (Indian Institute of Management Indore (IIMI)); Divyam Harlalka (Ivey Publishing, Western University); Prachi Khator (Ivey Publishing, Western University)

Published by: Ivey Publishing

Originally published in: 2024

Version: 2024-01-25

Length: 11 pages

Data source: Published sources

Topics: Life insurance company; Free cash flows valuation; Relative valuation; Finance; General management

Share a link: https://casecent.re/p/196578

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Abstract

In June 2022, two MBA students from a post-secondary institution in India were asked by their professor to build a valuation model for HDFC Life Insurance Company Limited to assess the company's stock price for investors. The students understood the importance of the task and tracked the company's historic stock price. They found that its share price dropped considerably in 2021, as the company's profits decreased due to a high number of claims during the COVID-19 pandemic. In 2022, however, the company witnessed a rise in profits mainly due to a high number of premiums, as fears from COVID-19 infections led more people to buy insurance coverage. Given that the company's profits and performance had been fluctuating, the students wanted to know whether the stock was undervalued, overvalued, or fairly priced. Their task was to determine the ideal stock price and whether to recommend the stock to investors.