HDB Financial shares: Nirmal Bang initiates coverage; check rating, target price & more

Domestic brokerage firm Nirmal Bang Institutional Equities has initiated coverage on recently listed HDB Financial Services (HDBFS). It believes that the upper layer non-banking financial company (NBFC) has embraced a strategy that balances sustainable long-term growth with profitability.

The key triggers for the positive outlook include HDBFS' strong asset under management (AUM) growth, robust parentage under HDFC Bank, and an improving operational profile. As of Q1FY26, HDBFS reported an AUM of approximately Rs 1.1 lakh crore, supported by a granular credit distribution network of 1,771 branches nationwide, focusing on rural regions, it said.

HDBFS has leveraged its scale, digital origination capabilities, and centralised processing to boost operating leverage. Nirmal Bang projects the cost-to-income ratio—at nearly 49% in FY25—to decline to around 43% by FY27. This improvement is expected to result from ongoing technology investments and process optimisation, Nirmal Bang noted.

The company’s strategy centres on balancing sustainable long-term growth with profitability. While HDBFS operates independently in sourcing, underwriting, operations, and risk management, it benefits significantly from HDFC Bank's established brand and legacy. This parentage provides strategic and reputational advantages, enhancing HDBFS' position in the market.

HDB Financial Services, a subsidiary HDFC Bank, was listed in July 2025, when the company raised a total of Rs 12,500 crore via IPO. The company sold its share for Rs 740 apeice and it scaled a high of Rs 891.65 on July 3, after listing. However, the stock traded at Rs 788.60 on Monday, up 6.5 per cent from its IPO price, but down 12 per cent from its all time high.

Operating efficiency, though lagging some peers, is being addressed through measures to reduce opex-to-loan ratios and enhance cost discipline. The company’s margins remain robust, supported by disciplined spread management and loan yields, it said.

Among competitors, Bajaj Finance (BAF) stands out as the closest peer regarding loan book composition. Nirmal Bang applies a 25% discount to HDBFS’s core business valuation, compared to the 20% holding company discount given to BAF, valuing BAF’s core business at 4x Jun-27E estimates.

Looking ahead, HDBFS is positioned to benefit from a declining interest rate cycle, with about 77% of its loan book on a fixed rate and 33% of borrowings on floating rates. The company also provides business process outsourcing (BPO) services and distributes fee-based financial products, diversifying revenue streams and supporting future growth momentum.

Nirmal Bang has initiated with a 'buy' and a target price of Rs 915 apeice, suggesting a 17 per cent upside from current levels. The recommendation is based on a valuation of 2.9x Sep-27E price to adjusted book value (P/ABV), with the adjusted book value estimated at Rs 315. HDBFS' projected return on assets (ROA) and return on equity (ROE) stand at 2.8% and 18.2% respectively, reflecting expectations of solid profitability improvements over the medium term.