Profit growth has accelerated from low single digits in FY26 to above 36% in H1 FY27 as margins recovered, deposit costs fell (cost of deposits 5.18%, down 39 bps YoY) and credit cost eased to 0.31%. Q4 FY26 margins of 3.74% were flattered by about ₹457 crore of interest on an income-tax refund, so Q2 FY27’s clean 3.32% is the better run-rate anchor.

Terminal value contributes about 23% of equity value, and the figure is highly sensitive to the discount rate because the stock earns only a modest spread over a 12% cost of equity. The 12% rate is the standing Zumedha default; brokers using lower discount rates or higher long-run ROE reach targets of ₹330–₹406, which the 11% row of the sensitivity table helps explain.

Brokers value the bank at roughly 1.6x–1.7x FY28E adjusted book (JM Financial, Anand Rathi), which supports a 1.8x band on nearer-term FY27E book for a bank earning a 13–14% ROE with improving margins. The 16x P/E band is a mid-range assumption: larger private banks with ROEs above 14% trade near 17x trailing earnings, while mid-sized banks usually carry a discount. Federal’s ROE of about 13.6% still trails the largest private banks, which argues for a modest discount.

For a bank, book value is the natural asset floor. With net NPAs at just 0.17%, a restructured book of 0.46% of advances and provision coverage near 87%, the stated book carries little hidden impairment. A bank earning above its cost of equity should trade above book, so this is a floor rather than a target; the uplift reflects broker-style estimates for Fedfina and Ageas Federal Life above carrying cost.

EPV capitalises today’s normalised earnings at the cost of equity with zero growth. Current credit cost of 0.31% is below a through-cycle level of roughly 0.50%, so profit is trimmed before capitalising. Because Federal is growing loans above 20%, EPV understates the franchise and acts as a lower bound on earnings-based value.

The SOTP values the banking franchise on price-to-book and adds the non-bank subsidiaries separately, following the convention used by Anand Rathi (which assigns about ₹20 per share to Fedfina and the life insurance JV). Because net worth already carries the subsidiaries at cost, a small overlap exists. Segment values are analyst estimates and should be revisited as subsidiary results are published.

News and sentiment overlay. Positives: record Q2 profit of ₹1,386 crore, gross and net NPAs at decade lows (1.32% / 0.17%), margin recovery to 3.32%, CASA at 32.04%, and a rise of about 4.7% to ₹353 intraday on 19 Oct after results, with brokers’ targets of ₹330–₹406 and a ten-broker average near ₹354. Negatives: persistent reports of a share-swap acquisition of Jana Small Finance Bank (press estimates ₹6,000–₹6,500 crore) which Citi and Anand Rathi flag as an integration and ROE-dilution risk, even though on 19 Oct the bank was reported to be not in active talks; dilution from Blackstone’s 27.3 crore warrants at ₹227; an insurance-distribution consultation paper that could affect fee income and Ageas Federal Life; and a price already near 2x book. Net adjustment: –1%.

A named top-10 holder table with percentages could not be sourced reliably, so it is omitted rather than estimated; June and September 2026 category figures also differed across sources. Scheme-wise and FPI-wise detail is available in the BSE/NSE shareholding filings; figures may lag the live quarter.