HDB Financial Services shares sink as Q1 net profit slips 2%, Emkay maintains 'buy'

This was the firm's first ever quarterly earnings release post its recent listing.

Shares of recently listed HDB Financial Services fell in trade on Wednesday, July 16, after the non-banking financial company posted its earnings show for the quarter ended June, 2025.

HDB Financial Services posted a net profit of Rs 568 crore for the April-June quarter of FY26, falling 2 percent compared to Rs 582 crore reported in the same period last year. The NBFC saw a 15 percent year-on-year increase in revenue from operations, which rose to Rs 4,465 crore from Rs 3,884 crore in Q1 FY25.

At 9.23 a.m., shares of the non-bank were trading at Rs 827.7, lower by 1.6 percent on the NSE.

Operating margin (EBITDA) for the quarter came in at 12.72 percent, down from 14.98 percent in the corresponding quarter a year earlier. Gross non-performing assets (NPAs) stood at 2.56 percent, while net NPAs were at 1.11 percent.

The company’s gross stage 3 assets increased to 2.56 percent in the first quarter, compared to 2.26 percent in the previous quarter and 1.93 percent a year ago.

Net interest income (NII) rose to Rs 2,092 crore in Q1 FY26, up from Rs 1,973 crore in the preceding quarter and Rs 1,768 crore in Q1 FY25, higher by 18.3 percent YoY and 6 percent QoQ. During the April-June period, net interest margin (NIM) edged up to 7.7 percent, slightly higher than the 7.6 percent recorded in both Q4 FY25 and Q1 FY25.

Emkay Global noted that HDB Financial Services posted a soft Q1FY26, with AUM growth staying modest due to seasonal factors and conscious recalibration of its asset mix. However, the brokerage added that "one weak quarter" does not change its investment thesis. It kept its 'buy' call on the non-bank intact, with a price target of Rs 900 per share.

"Asset quality saw marginal moderation and elevated credit costs, due to continual stress in the CV and USL segments. However, the management clarified that this trend is typical of Q1 and is on expected lines," noted Emkay.

Further, the management also expressed confidence on credit cost normalization in coming quarters. Ahead, margins are expected to improve further from Q2FY26 as a result of the higher fixed rate loan book (over 75 percent), with a significant portion of borrowings being linked to EBLR.

"Factoring in the Q1FY26 developments and management commentary, we revise down our FY26/27 AUM growth estimates by ~1 percent/2.5 percent, and marginally increase our credit cost estimate (offsetting the marginal improvement in yields), resulting in an EPS cut of 2-5 percent over FY26-

28," noted Emkay.

Follow our markets blog to catch all the live updates