HDB Financial was listed on July 2 after its Rs 12,500 crore initial public offering, priced at Rs 740 per share. Despite the correction, the stock is up almost 3% over the past month.Jefferies said the stock’s decline from post-listing highs has created room for upside potential, noting that HDB Financial is “down 10% from post-listing peak and trading at 2.7x FY27 BV (20x FY27 PE). We maintain a buy with PT at Rs 900 based on 2.8x Dec 27 BV.”
Growth improves, sustainability key
Jefferies said it recently hosted HDB Financial Chief Executive Officer Ramesh Ganesan for a US roadshow, where management indicated growth has improved following goods and services tax cuts, although it “remains early to draw conclusions on sustainability.”
Management expects assets under management to grow at an average annual rate of 18 to 20% over the next three years, with net interest margins likely to remain within a certain range, the report said.
According to the brokerage, disbursements were strong in October and “held up well in November”, with volume growth offsetting price deflation in segments such as two-wheelers, autos and consumer durables. For commercial vehicles, original equipment manufacturers initially withdrew rebates, but these were later reinstated, resulting in price deflation of 6 to 7%. While the overall momentum is encouraging, Jefferies noted that “sustainability needs to be looked at on a mgmt basis.”
Credit costs spiked
On asset quality, Jefferies said unsecured corporate loan stress from last year has stabilized, while commercial vehicle stress drove the increase in gross non-performing assets and credit costs in the first half of FY26. Management told investors that credit costs peaked at 2.7% in the September quarter and are expected to moderate to around 2-2.2% over the medium term.
“On the CV side, lending to entry-level truck drivers has stopped (higher stress); collections are better and forward flows have moderated,” the broker said, adding that filters introduced in unsecured business loans have lowered approval rates but also improved bounce rates and early delinquencies.
Returns will improve in the medium term
Jefferies expects moderation in credit costs and operating leverage to increase profitability in the coming years. According to the brokerage, HDB Financial is targeting a return on assets of around 2.5% and a return on equity of 16-17% over the next two to three years, up from 1.9% and 12.2% respectively in the September quarter.
“We expect sequential trends to improve and earnings per share to grow at 29% CAGR over FY26-28,” Jefferies said, adding that return on equity will improve to around 16% in FY2028.
For investors who chased the shares on their debut, HDB Financial’s fall from early highs has tested patience. For Jefferies, however, pulling back from the peak is exactly what makes the risk-reward ratio attractive at current levels.
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