Shares of HDB Financial Services, a subsidiary of India’s largest private sector lender HDFC Bank Ltd., opened 3% lower today, after the company reported its June quarter earnings, its first results since going public.Brokerage firm Emkay Global has maintained a ‘Buy’ rating on the stock with an unchanged price target of ₹900, saying that one weak quarter does not alter its investment thesis.
HDB Financial posted a soft Q1FY26, with net profit declining on a year-on-year basis. Disbursements were also lower both YoY and sequentially.
Assets Under Management (AUM) growth remained modest, impacted by seasonal factors and a conscious recalibration of the asset mix. This recalibration led to a 30-basis point improvement in yields, which in turn drove a 10-basis point sequential expansion in Net Interest Margins (NIMs).
Asset quality saw slight moderation, with elevated credit costs, largely due to ongoing stress in the Commercial Vehicle (CV) and Unsecured Loan (USL) segments. However, management clarified that such trends are typical for Q1 and were in line with expectations.Looking ahead, the management remains confident about credit cost normalisation in the coming quarters. Margins are also expected to improve from Q2FY26, supported by the higher proportion of fixed-rate loans (over 75%) and a large share of borrowings linked to the External Benchmark Lending Rate (EBLR).
HDB Financial posted a soft Q1FY26, with net profit declining on a year-on-year basis. Disbursements were also lower both YoY and sequentially.
Assets Under Management (AUM) growth remained modest, impacted by seasonal factors and a conscious recalibration of the asset mix. This recalibration led to a 30-basis point improvement in yields, which in turn drove a 10-basis point sequential expansion in Net Interest Margins (NIMs).
Asset quality saw slight moderation, with elevated credit costs, largely due to ongoing stress in the Commercial Vehicle (CV) and Unsecured Loan (USL) segments. However, management clarified that such trends are typical for Q1 and were in line with expectations.Looking ahead, the management remains confident about credit cost normalisation in the coming quarters. Margins are also expected to improve from Q2FY26, supported by the higher proportion of fixed-rate loans (over 75%) and a large share of borrowings linked to the External Benchmark Lending Rate (EBLR).
Based on Q1 performance and management commentary, Emkay has revised its AUM growth estimates for FY26 and FY27 downward by 1% and 2.5%, respectively.
It also marginally raised credit cost projections, offsetting the slight improvement in yields, resulting in a 2-5% cut in EPS estimates for FY26-28E.
Shares of HDB Financial Services closed 0.3% lower on Tuesday at ₹841.15, ahead of the earnings announcement. Since listing, the stock has hovered near its issue price of ₹840, with a post-listing high of ₹892.
First Published: Jul 16, 2025 8:36 AM IS
