Synopsis:
HDB Financial shares fell up to 4% after posting a soft Q1 FY26, with a slight dip in profit and weak disbursements. Despite this, Emkay Global maintained a ‘Buy’ rating with a Rs 900 target, citing confidence in the company’s long-term prospects and expected margin recovery from Q2.
The shares of a leading NBFC, which is a part of the HDFC Group, slipped up to 4% after it reported a muted Q1 FY26 performance, being its first quarterly results since listing. The stock opened lower as investors reacted to a dip in profitability and a slowdown in disbursements, both on a year-on-year and sequential basis.
With a market capitalisation of Rs 67,908 Crores, the share price of HDB Financial Services Ltd declined over 4% on Wednesday to hit an intraday low of Rs 810.00 per share from the previous day’s closing price of Rs 841.10 per share.
Q1 FY26 Update
HDB Financial Services reported a standalone revenue of Rs 4,465 crore in Q1 FY26, up 15% year-on-year (YoY) from Rs 3,884 crore in Q1 FY25 and 4.7% higher than Rs 4,266 crore in Q4 FY25.
Net profit for the April-June quarter stood at Rs 568 crore, reflecting a slight decline of 2.4% YoY from Rs 582 crore, but a 7% increase compared to Rs 531 crore in the previous quarter.
HDB Financial Services saw disbursements drop to Rs 15,171 crore, down 8.1% year-on-year and 14% sequentially, contributing to a soft quarter. Asset Under Management (AUM) growth remained modest as the company strategically shifted its asset mix. This recalibration led to improved yields and a 10 bps rise in Net Interest Margins (NIMs) to 7.7%.
Asset quality showed mild pressure: credit costs increased to Rs 670 crore from Rs 634 crore in the prior quarter, driven by stress in the Commercial Vehicle and Unsecured Loan segments.
Management noted this was typical for Q1. Looking ahead, the company expects credit costs to normalize and margins to improve from Q2, supported by a stronger mix of fixed-rate loans and borrowings linked to the EBLR.
Brokerage View
Emkay Global has maintained a ‘Buy’ rating on the stock with an unchanged target price of Rs 900, stating that one weak quarter doesn’t alter its long-term investment thesis. However, based on the Q1 performance and management commentary, Emkay has trimmed its AUM growth estimates for FY26 and FY27 by 1% and 2.5%, respectively.
The brokerage also marginally increased its credit cost assumptions, which offset the gains from improved yields, leading to a 2–5% cut in EPS estimates for FY26–FY28.
About the Company
HDB Financial Services Ltd. (HDBFS), a subsidiary of HDFC Bank, is a leading Non-Banking Financial Company (NBFC) in India. Incorporated in 2007, it serves both individuals and businesses with a wide range of financial solutions, primarily in lending and BPO services. The company focuses on meeting the needs of underbanked and underserved segments across the country.
HDBFS offers secured and unsecured loans across segments such as enterprise lending, asset finance (CVs, tractors, construction equipment), and consumer finance (auto, two-wheeler, and short-tenure loans). It operates a robust network of 1,771 branches across 1,166 cities and towns. link
The company also provides business process outsourcing (BPO) services like contact center management, document verification, and collections. Backed by AAA ratings from CARE and CRISIL for its long-term debt, HDBFS maintains a strong capital base and conservative lending approach, with a diversified and seasoned loan book of Rs 1.09 lakh crore.
Written By Rohan Pandey
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