HDBFS - HDB FINANC SER

📊 NSE: HDBFS 🏢 Non Banking Financial Company (NBFC) 📅 Last Updated: 11/13/2025 15:25

💰 Financial Performance

Revenue Growth by Segment

Total Gross Loans grew 13.0% YoY to INR 1,11,409 Cr in Q2 FY26. The Lending segment generated Net Interest Income of INR 4,284 Cr in H1 FY26, while the BPO segment contributed Net Income of INR 624 Cr. Interest income grew 15.3% YoY to INR 7,718 Cr for H1 FY26.

Geographic Revenue Split

The company operates a vast network of 1,749 branches across 1,157 cities/towns in India as of September 2025, providing a diversified pan-India presence to mitigate regional economic downturns.

Profitability Margins

Net Interest Margin (NIM) stood at 7.9% in Q2 FY26. Return on Assets (RoA) was 1.93% (adjusted 2.02%) for Q2 FY26, down from 3.0% in FY24. Return on Equity (RoE) was 12.23% for the same quarter.

EBITDA Margin

Pre-Provisioning Operating Profit (PPOP) for the lending business was INR 2,890 Cr in H1 FY26. Profit After Tax (PAT) for Q2 FY26 was INR 581 Cr, reflecting a decline from FY24 levels due to higher credit costs of INR 748 Cr in Q2 FY26.

Capital Expenditure

Not disclosed in available documents, though the company expanded its branch network from 1,771 branches in March 2025 to 1,749 reported in the Q2 FY26 summary (noting a slight consolidation or re-classification).

Credit Rating & Borrowing

Maintains a 'CRISIL AAA/Stable/A1+' rating. Borrowing costs are optimized through a diversified mix: Bank loans (40.1%), NCDs (37.5%), and ECBs (11.2%). The Cost of Funds (COF) was 6.1% in September 2025, down from 6.6% in September 2024.

⚙️ Operational Drivers

Raw Materials

As a financial services firm, the primary 'raw material' is capital. Borrowings of INR 90,541 Cr represent the core input, with Bank Loans (40.1%) and NCDs (37.5%) being the largest components.

Import Sources

External Commercial Borrowings (ECB) account for 11.2% of the liability mix, indicating sourcing of capital from international markets, while the remainder is sourced domestically within India.

Key Suppliers

Key capital providers include HDFC Bank (74.2% owner), various domestic Mutual Funds (Nippon, Kotak, SBI, Mirae, Franklin Templeton), and foreign institutional investors (Baillie Gifford, Morgan Stanley, Blackrock).

Capacity Expansion

Current capacity includes 1,749 branches and 21.0 million customers. The company has scaled from crossing the INR 1 Trillion AUM mark in 2024 to INR 1.11 Trillion in Q2 FY26.

Raw Material Costs

Finance costs for H1 FY26 were INR 3,434 Cr, representing 44.5% of interest income. The company utilizes a prudent ALM framework to maintain a positive cumulative mismatch across all time-buckets.

Manufacturing Efficiency

Lending business efficiency is driven by 61,332 employees. The BPO segment achieved a PBT of INR 43 Cr on a net income of INR 624 Cr in H1 FY26.

Logistics & Distribution

Distribution is handled through 1,749 physical branches and digital product loan channels introduced in 2019 to reach 'Aspirational India'.

📈 Strategic Growth

Expected Growth Rate

13%

Growth Strategy

Growth is driven by expanding the customer franchise (up 19.6% YoY to 21 million) and diversifying the loan mix into Consumer Finance (38.4% of book) and Asset Finance (38.0%). The company leverages its HDFC Bank parentage for scale and low-cost funding.

Products & Services

Commercial Vehicle Loans, Gold Loans, Auto Loans, Commercial Equipment Loans, Consumer Durable Loans, Digital Product Loans, Two-wheeler Loans, Microfinance, Lifestyle Finance, and Tractor Loans.

Brand Portfolio

HDB Financial Services (HDBFS).

New Products/Services

Recent additions include Tractor Loans (2020) and Microfinance (2018). Secured loans now comprise 73% of the total loan book to ensure asset-backed growth.

Market Expansion

Focus on 'Aspirational India' by increasing branch presence in 1,157 cities and towns to capture semi-urban and rural demand.

Market Share & Ranking

Not explicitly ranked, but identified as a subsidiary of India's largest private sector bank with a loan book exceeding INR 1.11 Lakh Cr.

Strategic Alliances

Distribution partnerships with HDFC Ergo General Insurance and HDFC Standard Life Insurance for insurance product cross-selling.

🌍 External Factors

Industry Trends

The NBFC sector is evolving toward digital-first lending and micro-segmentation. HDBFS is positioned for this via its 'Digital Product Loans' and 'Lifestyle Finance' offerings launched between 2017-2019.

Competitive Landscape

Competes with other large NBFCs and private banks in the vehicle, consumer, and enterprise lending spaces.

Competitive Moat

Durable competitive advantage derived from HDFC Bank's 74.2% ownership, providing superior credit ratings (AAA), lower cost of funds (6.1%), and a trusted brand that attracts 21 million customers.

Macro Economic Sensitivity

Sensitive to interest rate cycles (COF impact) and rural economic health, particularly affecting the Tractor loan segment which shows a high 5.3% delinquency rate.

Consumer Behavior

Shift toward 'Aspirational India' demand, where customers seek quick digital loans for consumer durables and lifestyle needs.

Geopolitical Risks

Limited direct exposure as operations are domestic, but global interest rate shifts affect ECB borrowing costs.

⚖️ Regulatory & Governance

Industry Regulations

Licensed by RBI as an NBFC. Complies with CRAR requirements, maintaining 21.82% (Tier-I at 17.26%), which is well above the regulatory minimum.

Taxation Policy Impact

Effective tax rate is reflected in the gap between PBT (INR 1,515 Cr) and PAT for H1 FY26. Deferred tax assets (Net) stood at INR 930 Cr as of September 2025.

⚠️ Risk Analysis

Key Uncertainties

Asset quality deterioration is the primary risk, with Gross NPA increasing from 1.9% in March 2024 to 2.81% in September 2025, potentially impacting future RoA.

Geographic Concentration Risk

Diversified across 1,157 cities, though Crisil notes that geographic concentration risk is factored into their shortfall assessments for specific loan pools.