HDB Finance’s Q2 FY26 PAT declined ~2% YoY to Rs 5.8 billion (in line). PAT in H1 FY26 declined ~2% YoY, and we expect H2 FY26 PAT to grow ~45% YoY. NII in Q2 FY26 grew ~20% YoY to ~Rs 21.9 billion (in line). Other income rose ~14% YoY to ~Rs 6.6b (in line).
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Motilal Oswal Report
HDB Financial Services Ltd. reported a muted quarter, with modest loan growth and disbursement activity impacted by factors such as heavy rainfall and demand deferment ahead of anticipated GST rate cuts.
Asset quality weakened further, resulting in sequentially higher credit costs. The only positive was a ~20bp expansion in NIM during the quarter, driven by a decline in the cost of borrowings.
HDB Financial offers a play on India’s high-growth, underpenetrated retail lending market. With an AUM of ~Rs 1.11 trillion and ~21 million customers, the company has built a granular, largely secured loan portfolio (~73% secured) and demonstrated credit discipline.
With strong governance, in-house collections, and a differentiated sourcing model, the company has the foundations for sustainable value creation. HDB Financial Services currently trades at 2.5x FY27E P/BV.
We estimate a CAGR of 12%/17%/24% in disbursement/AUM/PAT over FY25-28, with RoA/RoE of ~2.5%/15% in FY27. Reiterate Neutral with a target price of Rs 820 (premised on 2.6x Sep’27E BVPS).
With valuations largely factoring in medium-term growth potential, we will look for clearer evidence of stronger execution on loan growth, the ability to better navigate industry/product cycles, and structural (not just cyclical) improvement in return ratios.
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