HDB Financial Services shares fell 7% following the release of Q2 FY27 results, with the stock trading at ₹544.8 per share on Thursday, October 15, marking a new post-listing low for the stock. According to CNBC TV18, this represents the third consecutive session of decline, with the stock now down 26% from its issue price of ₹740 and 33.5% below its listing price of ₹835 from July last year. The market reaction comes despite the company delivering impressive financial performance, with brokerages expressing mixed views on the results. Motilal Oswal has retained its Neutral rating on HDB Financial Services Ltd. with a target price of ₹655, implying 12% upside from the report's CMP of ₹584, citing subdued loan growth and marginal asset quality deterioration as key concerns.
HDB Financial Services delivered impressive financial performance in Q2 FY27, with net profit jumping over 34% year-on-year to ₹780.2 crore compared to ₹581 crore in the corresponding quarter of the previous financial year. According to CNBC TV18, the company's profit after tax (PAT) of ₹780 crore declined 0.6% sequentially but was up 34.2% from last year's ₹581 crore. This significant profit increase demonstrates the company's strong operational performance during the July-September quarter, driven by healthy top-line expansion and operational efficiencies. The company also reported net interest income (NII) rising 15.6% YoY to ₹2,543 crore for the quarter ended September 30, 2026, up from ₹2,192 crore in the year-ago period, though sequential growth was moderate at just 1% from the previous quarter. Pre-provision operating profit increased 1.7% sequentially to ₹1,756 crore and was up 16.9% from the previous year's ₹1,502 crore.
The company's net interest margin (NIM) declined during the quarter, largely due to seasonal factors, with bank borrowings accounting for 43% of total borrowings and ~55-60% of these linked to the repo rate. According to CNBC TV18, NIMs during the September quarter at 8.23% were 12 basis points lower than the June quarter, but 28 basis points higher than the year-ago period's figure of 7.95%. The company's gross loan book increased to ₹1.24 lakh crore from ₹1.21 lakh crore last quarter and was up 11% from ₹1.11 lakh crore in the year-ago period. The total income increased 12% to ₹3,188 crore from ₹2,851 crore in Q2 FY26, while net total income increased 14% to ₹2,891 crore from ₹2,534 crore, indicating enhanced operational efficiency. The net profit margin improved significantly to 15.59% from 12.79% in the year-ago period, with loan losses and provisions declining 2.5% to ₹730 crore compared with ₹748 crore in the corresponding period last year.
Asset quality showed marginal deterioration with gross Stage 3 loans declining to 2.43% from 2.81% as of September 30, 2025, while net Stage 3 loans also fell to 1.09% from 1.27% in the year-ago period. According to CNBC TV18, asset quality deteriorated on a sequential basis with gross NPA at 2.43% from 2.34% in the June quarter. The provision coverage ratio on Stage 3 assets stood at 55% as of September 30, 2026, marginally higher than 54.73% a year earlier. However, sequential asset quality worsened as the gross NPA increased from 2.34% in the previous quarter. The company's stage one loans, which are low risk, increased 12.4% to ₹1.18 lakh crore, while stage 2 loans, which are underperforming moderately risky lending, increased 3% to ₹2,571 crore in the reporting quarter, though it was up over 12% sequentially. The share of gross advances in Stage 3 NPA reduced to 2.43% in Q2 FY27 compared to 2.81% in the year-ago period, demonstrating sustained improvement in credit quality across the company's portfolio.
Disbursements for the second quarter of fiscal year 2027 reached ₹18,522 crore, an increase of 19% year-on-year, indicating strong business momentum and robust demand for the company's lending products. According to CNBC TV18, the customer base expanded 18.4% to 24.8 million, demonstrating the company's successful customer acquisition strategy. Secured loans accounted for 74% of the loan book, providing stability to the overall portfolio composition. However, brokerages have expressed concerns about the company's performance. Motilal Oswal noted that earnings broadly in line with estimates but growth remaining subdued and asset quality showing marginal deterioration amid minor stress in the asset-finance portfolio. Nirmal Bang noted that AUM growth continues to disappoint with a muted 11.6% growth year-on-year, attributing the slowdown to a higher run-rate of repayments relative to disbursements. The brokerages have cut target prices significantly, with Nirmal Bang downgrading to 'Hold' and cutting the target price to ₹650 from ₹750, while JM Financial lowered its target price to ₹650 from ₹820. However, Nomura upgraded the stock to 'buy' from 'neutral' and has a target price of ₹790 per share, implying an upside of 35.3% from its previous closing price, citing sustained disbursal momentum and strong long-term outlook.
The company's capital adequacy ratio stood at 21.37% at the end of September, well above regulatory requirements, providing a strong foundation for future growth. Speaking to analysts, chief financial officer Jaykumar Shah indicated that disbursement momentum was expected to strengthen in the second half, with Q3 typically better than Q2 and Q4 better than Q3. As reported by CNBC TV18, growth is expected to be driven by loan against property, gold loans and unsecured business loans. The company's gross loan book grew 12% year on year to ₹1.24 lakh crore at the end of September, with the festive season expected to provide a significant boost to consumer finance demand. The management expects assets under management (AUM) growth to accelerate towards 17%-18% over the next 12 to 18 months and has targeted 8.2% NIM in the near-term and sees the figure sustain above 8% over the longer term. The company has a credit cost guidance of around 2.3% and hopes to hold net interest margin (NIM) at 8% and return on assets (RoA) at 2.5% despite the rising interest rate environment and potential drought conditions. Nomura expects HDB Financial's RoA to be between 2.3% to 2.4% and Return on Equity (RoE) to be between 14.1% to 15.2% over financial year 2027-2029. Of the 18 analysts who have coverage on HDB Financial, 10 have a 'buy' rating, six have a 'hold' rating and two have a 'sell' rating.
