HDB Financial shares below IPO price after muted Q2 show; should you buy, sell or hold?

Brokerage firm continued to remain divided on HDB Financial Services (HDBFS) after its Q2 results. While some analysts have downgraded the stock and cut their targets, while others believe that the stock is headed for decent returns and see up to 24 per cent upside potential in the shadow lender post its quarterly earnings.

HDB Financial Services reported a 1.5 per cent decline on a year-on-year (YoY) basis in net profit at Rs 581 crore for the quarter ended September 30, 2025, hurt by higher loan losses and provisions. The HDFC Bank-led NBFC's revenue rose 13 per cent YoY to Rs 4,545 crore in Q2FY26.

HDB Financial Services announced an interim dividend of Rs 2 per share for FY26. The shadow lender has fixed October 24 as the record date for payment of interim dividend. Loan losses and provisions rose 74 per cent to Rs 748 crore.

Following its results, shares of HDB Financial Services dropped more than 1.35 per cent to Rs 733.15 on Thursday, against its previous close at Rs 743.35 on Wednesday. The stock was marginally shy of its all time low at Rs 728.60, while it has corrected nearly 18 per cent from its 52-week high at Rs 891.65. The company managed to hold a total marketcap of Rs 61,000 crore.

HDB Financial Services reported a miss in PAT on account of higher than expected credit costs as asset quality trends were negatively impacted by CV/CE, said JM Financial. PPoP was in line with estimates led by expansion in NIMs. Disbursements were muted leading to further moderation in AUM YoY growth in 2QFY26, it said.

"We believe despite a strong franchise, HDB stands inferior among diversified peers in terms of AUM growth and returns profile against peers over FY25-27E. We have cut our FY26-28E EPS by 3-7 per cent leading to cut in target price to Rs 740 (Rs 780 earlier), valuing it at 2.6 times FY27E P/B. We change our rating from 'hold' to 'reduce' to align with our new rating system," it added.

HDBFS posted an overall weak Q2FY26, with AUM growth, asset quality, and credit cost coming in worse than consensus’ and estimates. The management pinned the reason for the poor show in Q2 to the CV/CE segments that saw increased stress due to heavy monsoon-led excessive idle time of vehicles. The MSME segment saw overall stabilization, said Emkay Global.

"Factoring in the Q2FY26 developments and management commentary, we marginally trim FY26E/28E AUM growth by 1 per cent/2.5 per cent, and slightly increase our credit cost estimate by 20 bps which results in an EPS cut of 6-8 per cent over FY26-28E. We maintain 'BUY' on the stock while revising down target price by 6 per cent to Rs 850 (Rs 900 earlier)," Emkay adds.

Shares of HDB Financial Services were listed at bourses in July 2025 when the company raised a total of Rs 12,500 crore via IPO, by selling its shares for Rs 740 apiece. The stock has slipped below its IPO price.

While demand remained subdued in 2Q due to heavy rainfall, flooding, and deferred purchases ahead of anticipated GST cuts, management expects a strong rebound in retail demand in 3Q and 4Q, and anticipates growth momentum to accelerate in 2HFY26, said Motilal Oswal Financial Services, reiterating 'neutral' rating with a target price of Rs 820.

"We remain positive on HDBFS on account of strong AUM growth trajectory; improving cost-to-income ratios and strong parentage of HDFC Bank leading to best credit rating and lower cost of funds, " said Nirmal Bang Institutional Equities. "We value HDBFS at 2.9 times its September 2028E ABV of Rs 314 with a target of Rs 912," it said with a 'buy' rating on the stock.