HDB Financial gets new 'Buy' rating from Nirmal Bang; 17% upside seen

Nirmal Bang has initiated coverage on HDB Financial with a ‘Buy’ rating and a target price of ₹915, which implies 17.1 per cent upside from Monday’s close at ₹781.05 per share. HDB Financial Services is an upper-layer non-banking financial company (NBFC), focusing its operation on retail lending.

 

On Monday, HDB Financial's share price closed 0.25 per cent lower at ₹781.05 per share. In comparison, the BSE Sensex was down 0.56 per cent at 82,159.97.

 

HDB Financial Services shares made a debut on July 2, 2025, on Indian bourses. On the BSE, HDB Financial shares listed at ₹835 per share, reflecting a premium of ₹95 or 12.83 per cent from the IPO issue price of ₹740. Similarly, on the National Stock Exchange (NSE), HDB Financial shares were listed at a premium of ₹95 or 12.8 per cent, at ₹835 per share.  Track Stock Market Live Updates

Why is Nirmal Bang upbeat on HDB Financial Services?

Granular lending franchise

HDB Financial had an AUM of ₹1.1 trillion as of 1QFY26, with operations spanning 1,771 branches across India, including a strong focus on rural markets. The company has developed a granular credit profile supported by its wide distribution footprint.

 

Analysts at Nirmal Bang believe the company has strategically positioned itself in a declining interest rate cycle, with 77 per cent of its loan book on fixed rates, while 33 per cent of its borrowings on floating rates are expected to benefit as the repo rate eases.

Well-diversified portfolio

Beyond lending, HDB Financial provides business process outsourcing (BPO) services—such as back-office operations, collections, and sales support—primarily to parent HDFC Bank. It also distributes fee-based products, including general, life, and health insurance.

Profitability tailwinds

Over the medium term, the company aims to leverage its scale, digital origination platform, and centralised processing model to drive efficiency. The cost-to-income ratio (money spent to earn revenue), which stood at 49 per cent in FY25, is projected to decline to 43 per cent by FY27, supporting profitability, according to the brokerage analysis.

 

Backed by parentage under HDFC Bank (which holds a 74 per cent stake), HDB Financial is expected to benefit from strategic and reputational strength. Analysts note that AUM growth, combined with declining opex intensity, strong underwriting discipline, and robust collection efficiency, will accelerate profit growth and strengthen return on assets (ROA) over the medium term.

Valuation and peer comparison

HDB Financial Services (HDBFS) is currently valued at 2.9 times its estimated adjusted book value for September 2027. The company maintains strong profit margins of 7 per cent, driven by healthy loan yields of 14 per cent and careful management of its lending spreads.

 

However, HDB Financial's operating efficiency is still lower than its competitors, with operating expenses at 4.8 per cent of loans and a cost-to-income ratio of 49 per cent. This is largely due to its ongoing expansion and investments in technology, which are expected to improve efficiency over time.

 

When compared to Bajaj Finance (BAF), a similar peer, BAF's core business is valued higher at 4 times its estimated adjusted book value for June 2027. This difference in valuation (HDB Financial gets a 25 per cent discount compared to BAF's core business) reflects the current gap in operational efficiency between the two companies.