HDB Financial shares rise as Motilal Oswal initiates coverage; check upside

HDB Financial shares rose as much as 1.31 per cent after Motilal Oswal assigned a 'Neutral' rating on the stock

Motilal Oswal Financial Services has initiated coverage on HDB Financial Services, citing a strong financial outlook, driven by a gradual decline in credit costs and higher operating leverage. 

 

The brokerage assigned a 'Neutral' rating on the HDB Financial Services stock with a target price of ₹860 per share, an upside of 9 per cent from Wednesday's close.  

 

With valuations largely factoring in medium-term growth potential, Motilal Oswal said it would look for clearer evidence of stronger execution on loan growth, ability to better navigate industry/product cycles, and structural improvement in its return ratios. 

 

The Non-Banking Financial Company's (NBFC) lending strategy is underpinned by a focus on maintaining strong asset quality, supported by data-driven underwriting, rigorous portfolio monitoring, and effective recovery processes, the brokerage said in a report.   TRACK LIVE STOCK MARKET UPDATES TODAY HERE 

 

With a strategic focus on underserved segments across Tier 2 and beyond, a direct sourcing-led origination engine, and execution precision honed over multiple credit cycles, the company is now entering a phase of scalable and profitable growth, it said. 

 

Operating expenses ratios have remained elevated over the past few years due to substantial investments in expanding the physical infrastructure, the brokerage noted. "However, with the distribution footprint now largely in place and volumes expected to improve, we anticipate a steady improvement in its cost ratios."

 

HDB Financial is well-positioned to benefit from 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 will benefit from the decline in the policy repo rate. 

HDB Financial Q1 results

The subsidiary of HDFC Bank reported a marginal year-on-year (Y-o-Y) decline of 2.4 per cent in net profit to ₹568 crore for the quarter ended June 2025 (Q1FY26), owing to a rise in credit costs.

 

Its net interest income (NII) during Q1FY26 rose 18.3 per cent Y-o-Y to ₹2,092 crore, while non-interest income increased nearly 8 per cent YoY to ₹330 crore. Meanwhile, credit cost jumped 62.4 per cent Y-o-Y to ₹670 crore in Q1FY26, compared to ₹412 crore in the corresponding period last year. In Q4FY25, credit cost stood at ₹634 crore.

 

The company reported a net interest margin (NIM) of 7.7 per cent in Q1FY26, up from 7.6 per cent in Q4FY25. 

HDB Financial share price history

The NBFC's stock rose as much as 1.31 per cent during the day to ₹798.6 per share, the highest level since July 23 this year. The stock pared gains to trade 1.1 per cent higher at ₹797 apiece, compared to a 0.23 per cent advance in Nifty 50 as of 10:00 AM. 

 

Shares of the company have gained over 8 per cent from their recent August lows of 732.7 per share. The counter has fallen 4 per cent since its listing on July 2 this year, compared to a 1.6 per cent decline in the benchmark Nifty 50. HDB Financial has a total market capitalisation of ₹66,361.19 crore. 

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