HDB Financial Services Ltd. share price target

HDB Financial Services (HDBFS) has entered FY27 on a stronger footing after nearly two years of portfolio recalibration. Improving disbursement momentum, resilient profitability, and healthier asset quality suggest that the company is moving beyond the stabilization phase.

We visited HDBFS’ credit branches in Varanasi, Uttar Pradesh (UP), which represents 14% of its total AUM, as on Jun’26. Our visit delves into HDBFS’ market positioning in one of the fastest-growing states in its portfolio, and how the company has been weathering geopolitical uncertainties, fuel price hike and El-Nino.

HDBFS sustained its improving earnings trajectory, despite sector-level headwinds, including elevated interest rates and geopolitical challenges, with steady RoE expansion to ~15% in Q1FY27 vs. 13.2% in Q1FY26.

HDB Financial Services (HDBFIN)’s 1QFY27 PAT rose 38% YoY to ~INR7.85b (~5% beat). NII grew 20% YOY to ~INR25.1b (in line). Other income stood at ~INR6.8b (up 7% YoY).

HDB Financial Services (HDBFS) – a blue-chip heritage paired with a formidable low-cost borrowing moat. The combination bestows an inherent advantage upon the company to command sustainable, scalable and high-margin growth.

HDB Financial Services’ (HDBFIN) 3QFY26 PAT rose 36% YoY/11% QoQ to ~INR6.4b (in line). Adjusted for the one-time provisioning on the new labor codes, PAT stood at INR6.8b and rose ~44% YoY.

Over the past year, HDB Financial (HDB) has navigated a phase of consolidation, reflected in subdued disbursement momentum, modest AUM growth, and emerging asset-quality pressure across a few of its key product segments.

HDBFS posted an overall weak Q2FY26, with AUM growth (13% YoY), asset quality (GS3 +25bps QoQ to 2.81%), and credit cost (2.7%) coming in worse than consensus’ and our estimates.

HDB Finance (HDBFIN)’s 2QFY26 PAT declined ~2% YoY to INR5.8b (in line). PAT in 1HFY26 declined ~2% YoY, and we expect 2HFY26 PAT to grow ~45% YoY. NII in 2QFY26 grew ~20% YoY to ~INR21.9b (in line). Other income rose ~14% YoY to ~INR6.6b (in line).

HDB Financial Services (HDB) is the seventh-largest diversified, retail-focused NBFC in India with an AUM of ~INR1.1t as of Jun’25.

We initiate coverage on HDB Financial Services (HDBFS) with BUY and Jun-26E TP of Rs 900 (+22% upside), on FY27E P/B of 3.0x. Our positive view is due to, HDBFS being a highly diversified (geographically and product-wise), extremely granular (top 20 accounts constitute ~0.34% of AUM), and large-scale lending franchise with over 19mn customers.

HDB Financial Services Ltd (HDBFS) is a subsidiary of HDFC Bank Ltd. It is a non-banking financial corporation, provides a range of financial services in India. The company offers secured loans against long and short term investments, equities, bonds, ESOPs, commercial vehicles, property, gold, and jewellery; and unsecured loans, including business and personal loans. It also provides general insurance products, such as motor, health, critical illness, travel, home, and personal accident...

IPO NOTE

HDB Financial Services is one of the leading diversified retail-focused NBFC with an AUM of Rs.1,073bn as of FY25. With a strong parentage of HDFC Bank, the non-bank lender primarily offers loans under 3 main verticals--Enterprise lending, Asset Finance and Consumer Finance. The company had 1,771 branches as of FY25, with over 80% of the branches outside India's 20 largest cities and over 70% are located in tier 4+ towns. Secured loans formed ~73% of the total gross loan portfolio of the company. The company primarily caters to underserved and underbanked customers in low to middle-income households...

Company is the seventh largest leading, diversified retail-focused non-banking financial company (NBFC) in India in terms of the size of Total Gross Loan book at 902.2 billion as at March 31, 2024, amongst its NBFC peers. Company is categorized as an Upper Layer NBFC (NBFC-UL) by the RBI. It offer a large portfolio of lending products that cater to a growing and diverse customer base through a wide omni-channel distribution network. Company's lending products are offered through its...