HDB Financial Services Reports 13% Loan Growth, Faces Challenges in CV Segment in Q2 FY26

HDB Financial Services , a leading non-banking financial company (NBFC), reported a 13% year-on-year growth in its gross loan book for the quarter ended September 30, 2025. The company faced challenges in the commercial vehicle (CV) segment but saw improvements in other areas of its diversified portfolio.

Key Financial Highlights

Metric	Q2 FY26	YoY Change
Gross Loan Book	₹111,409.00 crores	+13.00%
Net Interest Income	₹2,192.00 crores	+19.60%
Net Interest Margin	7.90%	+40 bps
Profit After Tax	₹581.00 crores	+2.30% (QoQ)
Credit Costs	₹748.00 crores	+11.60% (QoQ)
Gross Stage 3 Assets	2.81%	+25 bps (QoQ)

Loan Book and Asset Quality

The company's gross loan book stood at ₹111,409.00 crores as of September 30, 2025, with secured loans comprising 73% of the total loan book. However, the company faced asset quality pressures, particularly in the commercial vehicle financing segment. Gross Stage 3 assets rose to 2.81% from 2.56% in the previous quarter.

Segment Performance

Commercial Vehicle Financing

The CV segment experienced challenges due to monsoon-related vehicle idling and asset quality pressures. Management reported that vehicle idling in certain markets reached 30-35%, compared to the usual 20% seen in Q2.

Consumer Finance

The consumer finance segment showed positive signs, with the company reporting good traction in the first 10 days of October. Auto loans, two-wheelers, and consumer durables have started picking up, indicating potential growth in the coming festive season.

Enterprise Lending

The Loan Against Property (LAP) portfolio remained stable with low credit costs. The Business Loans segment has shown signs of stabilization and slight improvement in Q2.

Growth Outlook

Management expressed optimism about growth prospects in the coming quarters, citing several factors:

Festive season demand
GST rate cuts, particularly in the auto and consumer durables segments
Expectations of improved rural consumption

The company aims for an 18-20% CAGR book growth over a 3-5 year period, subject to GDP growth and market conditions.

Customer Base and Technology

HDB Financial Services reported a 19.60% year-on-year growth in its customer base, reaching 21 million customers. The company continues to invest in technology, with initiatives like "HDB on-the-go" aimed at improving customer experience and operational efficiency.

Management Commentary

G Ramesh, MD & CEO, commented on the diversified portfolio strategy: "The diversified portfolio helps us grow in a balanced fashion across cycles and also balance out the credit cost. While it has been a little high in the last quarter or two, we are very hopeful of bringing it to a moderate level in the coming quarters."

As HDB Financial Services navigates through the current challenges, particularly in the CV segment, it remains focused on leveraging its diversified portfolio and technological capabilities to drive growth in the upcoming festive season and beyond.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-0.98%	-0.90%	-7.31%	-13.18%	-13.18%	-13.18%

HDB Financial Services , a subsidiary of HDFC Bank, reported mixed financial results for the second quarter, with shares opening lower and falling below their initial public offering (IPO) price.

Financial Performance

The non-banking finance company (NBFC) saw its profit after tax decline by 1.70% year-on-year to ₹581.00 crore for Q2, missing analyst estimates. This decrease was primarily attributed to higher provisions, which pushed the credit costs to 2.70% - the highest level since the COVID-19 pandemic.

Despite the profit decline, HDB Financial Services demonstrated strong growth in other key metrics:

Net interest income grew by 20.00% to ₹2,192.00 crore
Net interest margin improved by 20 basis points to 7.90%
Pre-provision operating profit surged 24.00% to ₹1,530.00 crore

Loan Book and Asset Quality

The company's loan book expanded by 13.00% year-on-year, reaching ₹1,11,409.00 crore. However, disbursements remained flat compared to the same period last year.

Asset quality showed some signs of stress:

Gross Stage 3 loans increased to 2.81% from 2.10% a year ago
Net Stage 3 loans rose to 1.27% from 0.83% in the previous year
Provision coverage ratio on stage 3 assets declined to 54.73% from 60.69% a year earlier

Segment Performance

HDB Financial Services operates through three main business verticals:

Enterprise Lending: 38.00% of total gross loans
Asset Finance: 38.00% of total gross loans
Consumer Finance: 24.00% of total gross loans

Management Outlook

The company's management expects credit costs to moderate to 2.20% and has set a target of 18-20% loan growth over the next 3-5 years.

Analyst Views

Morgan Stanley maintains an 'Equalweight' rating with a target price of ₹805.00
Jefferies has a 'Buy' rating with a target price of ₹900.00

Dividend Announcement

The Board of Directors has declared an interim dividend of ₹2.00 per share (20.00% on face value).

While HDB Financial Services continues to show growth in its loan book and net interest income, the increase in provisions and decline in profit have raised some concerns among investors. The company's ability to manage asset quality and moderate credit costs will be crucial for its performance in the coming quarters.