Target: ₹900
CMP: ₹642.25
HDB Financial Services (HDBFS) – a blue-chip heritage paired with a formidable low-cost borrowing moat. The combination bestows an inherent advantage upon the company to command sustainable, scalable and high-margin growth. Notably, HDBFS has been strategically firming up an asset franchise stronghold (over ₹1 lakh crore, as of FY25) in India’s underserved hinterlands (about 70 per cent) branches in tier-4+ locations).
Separately, despite macroeconomic headwinds, it delivered a over 20 per cent AUM CAGR (FY14–25), bolstering its leading NBFC status. A decadal around 2 per cent credit cost average is testament to HDBFS’ cycle-tested underwriting and risk-management protocols. HDBFS’ focus on direct customer sourcing – accounts for over 80 per cent of FY25 disbursements – facilitates customer quality and operational efficiency.
We initiate coverage at Buy and a TP of ₹900, basis 3x Sep’27E BVPS.
Key risks: Delayed Management expects growth to exceed nominal GDP by 6–7 per cent in near-term. While positive trends in CV volumes suggest that HDBFS is well-positioned to benefit from a CV upcycle, the company faces risks from market share loss and overall sluggishness in the CV segment; HDBFS operates in highly competitive segments like LAP, CV and gold. Most of these segments are currently witnessing intense competition from banks; and AI disruption may lead to higher unemployment (especially in IT sector) and part of its consumer finance business is directly exposed to the salaried segment.