HDB Financial shares down 4% after Q1 earnings, should you buy?

HDB Financial Services saw a 3.7% decline in its shares after reporting a 2.4% drop in net profit to ₹568 crore for the quarter ending June.
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REUTERS/Dado Ruvic

Shares of HDB Financial Services declined 3.7 per cent following a 2.4 per cent decline in net profit for the quarter ended June at ₹568 crore.

The NBFC arm of HDFC Bank posted 18 per cent growth in net interest income (NII) to ₹2,092 crore. The net interest margin (NIM) was stable at 7.7 per cent in the reporting quarter. Its AUM zooomed nearly 15 per cent to ₹1,09,690 crore

Outlook

The management showcased confidence on delivering growth and profitability, backed by a strong macro environment and rural recovery. They expect the impact of likely rate cuts to start showing from Q2FY26, helping to increase profit margins.

On the issue of higher credit costs, the management explained that they have been adjusting their loan mix, especially in the commercial vehicle (CV) and unsecured small business loan (USL) segments being the prime contributors to the overall credit cost. They believe this will improve in the coming quarters.

Market view remains constructive

Emkay Global has maintained buy on HDB Financial at a target price of ₹900, noting the softer Q1 numbers with modest AUM growth due to seasonal factors and conscious recalibration of its asset mix.

The brokerage has revised AUM growth estimates for FY26 and FY27 by 1 per cent and 2.5 per cent, respectively. It also madfe a small upward revision to credit cost forecast, which balances out the minor improvement in loan yields. As a result, earnings per share (EPS) projections for FY26 to FY28 have been trimmed 2–5 per cent.

Nitin Jain, Senior Research Analyst at Bonanza Portfolio, said that the outlook remains positive given the solid fundamentals and growth guidance. According to Jain, the Q1 numbers reflect operational growth with expanding loan book and improving margins, but elevated credit costs and asset quality pressures currently weigh on net profit.

The stock traded 2.72 per cent lower on the BSE at ₹818.20 as at 12.48 pm, hitting an intraday low of ₹810. It opened lower at ₹822.05 against the previous close of ₹841.10.

Published on July 16, 2025