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ICICI Securities Report
ICICI Securities initiates coverage on HDB Financial Services Ltd. with a Buy rating, highlighting its blue‑chip parentage, structurally low‑cost borrowing advantage, and superior asset‑quality track record as key pillars supporting long‑term compounding potential.
HDB Financial stands out as among the few NBFCs to have successfully scaled its asset base to >Rs 1 trillion, driven by its diversified asset mix and robust pan-India distribution. Notably, it has never incurred an annual loss, with its only significant RoE dip (5% in FY21) occurring during the Covid-19 pandemic, with only one year of single-digit RoE (during Covid-19). Before that, since FY14, it has never incurred a loss on an annual basis.
While peer NBFCs with similar size and profitability maintain a trading P/BV multiple at ~2x, HDB traded at a premium to three times P/BV during H1 FY26, a reflection of market factoring in its consistently strong operating performance. However, decelerating AUM growth of 13%, as of Dec'25 (18% YoY in Mar'25) and elevated credit cost at 2.5%, led to recent valuation de-rating.
This slowdown was primarily tied to stress in unsecured business loan (10% of loans) and the commercial vehicle/construction equipment portfolio (34% of loans). But both the segments are set to improve as the external environment improves. Leveraging a cyclical upswing in CV and stabilising stress in unsecured BL, the company is strategically shifting towards high-yielding products to drive ~17% AUM and ~25% PAT CAGR over FY26–28E.
Profitability is likely to benefit from a 25 bps repo rate cut in Dec'25 and a peaking of credit costs, which are anticipated to moderate towards 2% over the medium term.
Overall, the brokerage projects RoA/RoE to expand to ~2.5%/16.2% by FY28E, from 2.2%/13.1% in Dec'25. Driven by a superior execution track record, an improving sector outlook, and strong leadership and committed promoter, ICICI Securities remain confident in the company's ability to deliver long-term shareholder value.
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