HDB Financial Services (HDBFS), the NBFC arm of HDFC Bank, announced its first quarter results post-IPO for the quarter ended 30 June 2025 (Q1 FY26). HDB Financial Q1 FY26 numbers are a mixed bag of strong operational performance and a slight dip in net profit due to higher provisioning and tax-related headwinds.
📉 HDB Financial Q1 FY26 Results: Net Profit Down
HDB Financial reported INR 568 crore net profit, down 2.4% YoY from INR 582 crore in Q1 FY25. On a QoQ basis, net profit was up 6.9%, but the YoY decline disappointed the market and the stock fell 3.6% to close at INR 810 on 16 July.
Despite the decline, the company had a good operational performance, with growth in interest income, loan book and margins.
💰 HDB Financial Q1 Results: Revenue and Operational Metrics
- Total revenue from operations rose 15% YoY to INR 4,465 crore, compared to INR 3,884 crore in Q1 FY25.
- Net interest income (NII) jumped 18.3% YoY to INR 2,092 crore, from INR 1,768 crore, and increased 6% sequentially.
- Net interest margin (NIM) improved 10 basis points YoY, rising to 7.7%, driven by asset mix recalibration and improved yields.
- Pre-provision operating profit (PPOP) rose 17% YoY to INR 1,402 crore.
📉 Profitability and Margins Under Pressure
- Net profit margin declined to 12.72% in Q1 FY26, down from 14.98% a year ago.
- The dip was largely attributed to a sharp increase in loan loss provisions, which rose 62.5% YoY to INR 670 crore, up from INR 412 crore in Q1 FY25.
- Additionally, deferred tax adjustments, increased employee costs, and higher financing expenses contributed to bottom-line compression.
HDB Financial Q1 FY26: Asset Quality Weakens Slightly
While asset growth remained healthy, asset quality metrics showed modest deterioration:
- Gross Stage 3 loans (equivalent to gross NPAs) rose to 2.56%, up from 1.93% a year ago and 2.26% in Q4FY25.
- Net Stage 3 (net NPA) also rose to 1.11% from 0.77% in Q1 FY25.
- Provision coverage ratio (PCR) on Stage 3 loans fell to 56.70% from 60.24% a year earlier.
- The company’s credit cost increased to 2.5% of total gross loans, up from 1.8% in Q1 FY25.
The increase in delinquencies was particularly noted in the Commercial Vehicle (CV) and Unsecured Loan (USL) segments, according to commentary from brokerage Emkay Global.
📊 Loan Book Growth and Disbursements
- Total gross loans surged 14.3% YoY to INR 1.09 lakh crore.
- Segment-wise mix of the loan book:
- Enterprise Lending: 38.7%
- Asset Finance: 37.8%
- Consumer Finance: 23.5%
- Disbursements, however, fell 8.09% YoY to INR 15,171 crore, indicating a temporary pullback due to seasonality and strategic recalibration.
📈 Valuation & Market View
Despite the muted headline profit, brokerage firms remain positive on the stock. Emkay Global reiterated a ‘Buy’ rating, with a target price of INR 900, implying ~11% upside from current levels.
“The quarter saw a soft AUM growth due to seasonal moderation and asset mix recalibration. However, yield improvements and NIM expansion were key positives. We cut our FY26–28 EPS estimates by 2–5%, reflecting higher credit costs and slower AUM growth,” Emkay noted.
At the current market price of INR 815 and a book value of INR 225.4 per share, HDBFS trades at a price-to-book (P/B) ratio of 3.61x and a forward P/E of approximately 29.1x, based on annualised Q1 EPS of INR 7.1.
HDB Financial Q1 FY26: Key Financial Ratios and Metrics
| Metric | Q1 FY25 | Q1 FY26 |
|---|---|---|
| Revenue from operations | 3,884 | 4,465 |
| Net Profit | 582 | 568 |
| Net Interest Income (NII) | 1,768 | 2,092 |
| Net Interest Margin (NIM) | 7.6% | 7.7% |
| Gross Loans | 95,629 | 1.09 lakh crore |
| Gross NPA (Stage 3) | 1.93% | 2.56% |
| Provision Coverage Ratio (PCR) | 60.2% | 56.7% |
| Cost-to-Income Ratio | 43.2% | 42.7% |
| Return on Equity (ROE) | ~14% | 13.16% |
| Capital Adequacy Ratio (CAR) | 18.84% | 20.18% |
IPO and Market Debut Recap
HDB Financial Services was listed on 2 July 2025 at a 13.64% premium to the IPO allotment price. The INR 12,500-crore IPO was subscribed 16.69x, and post listing, the company became the 8th largest NBFC in India with a market cap of INR 70,000 crore.
🧭 Outlook
HDB Financial Q1 FY26 was a tough quarter for short-term profits, but HDB Financial’s operational strength, margin expansion and loan book growth show its long-term strength. Provisions and asset quality slippages are something to watch out for, especially in the CV and unsecured loan book.
As interest rates continue to fall, financing costs will ease further, giving a boost to profitability in the coming quarters. Investors may see this correction as an entry point—long-term drivers for the NBFC sector are still intact.
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