The brokerage wrote in its note that HDB Financial has built one of India’s most granular and credit-disciplined lending franchises, rooted in a bottom-up approach that combines product breadth, geographic depth, and robust risk management.
With a strategic focus on underserved segments across Tier-2 and beyond, a direct-sourcing-led origination engine, and execution precision honed over multiple credit cycles, HDB is now entering a phase of scalable, profitable growth, it added.HDB Financial is the seventh-largest diversified, retail-focused NBFC in India, with an AUM of ₹1.1 lakh crore as of June 2025. The company delivered a 20% AUM CAGR over FY22-FY25 and has built a wide nationwide footprint.
Backed by HDFC Bank’s institutional ethos and a seasoned management team, the company is positioned to deliver 19% AUM CAGR over FY25-28E, with RoAs expanding from 2.2% in FY25 to 2.6% by FY28, without compromising on asset quality or governance.
With scale benefits beginning to kick in, Motilal Oswal expects HDB to deliver a PAT CAGR of 26% over FY25-28E and an RoA/RoE of 2.6%/16.5% by FY28, aided by a gradual decline in credit costs and improved operating leverage.However, the brokerage said that valuations already capture much of the medium-term growth potential. It said it would look for clearer evidence of stronger execution on loan growth, better ability to navigate industry and product cycles, and structural (not just cyclical) improvement in return ratios.
The company recently announced its June quarter results, its first earnings report since listing.
HDB Financial posted a soft Q1FY26, with net profit declining year-on-year. Disbursements were lower both YoY and sequentially.
AUM growth remained modest, impacted by seasonal factors and a conscious shift in the asset mix. This recalibration improved yields by 30 basis points, which in turn led to a 10-basis point sequential rise in Net Interest Margins (NIMs).
Asset quality moderated slightly, with elevated credit costs, mainly due to stress in the Commercial Vehicle (CV) and Unsecured Loan (USL) segments. Management clarified that these trends are typical for Q1 and aligned with expectations.
Looking ahead, they expect credit costs to normalise in the coming quarters, while margins are likely to improve from Q2FY26, supported by a higher share of fixed-rate loans (over 75%) and significant borrowings linked to the External Benchmark Lending Rate (EBLR).
HDB Financial shares are now trading 2.53% higher at ₹808.20. The stock has risen 7% in the last five sessions.
