HDB Financial Services, the non-banking financial arm backed by HDFC Bank, has reported its financial results for the first quarter of FY26. The company posted a net profit of 568 crore rupees, marking a year-on-year decline of 2.4 percent. This drop in profitability comes despite higher net interest income and an expanding loan book, largely due to a sharp spike in provisions and worsening asset quality.
This is the first quarterly report since HDB Financial Services was listed on the stock exchanges. The results reflect a mixed performance, with steady revenue growth offset by growing credit concerns. Sequentially, however, net profit saw an increase of 7 percent, indicating some short-term resilience in earnings.
One of the biggest concerns in the report is the rise in bad loans. The gross non-performing asset ratio rose to 2.56 percent as of June 30, up from 1.93 percent a year ago. The net NPA ratio also worsened to 1.11 percent from 0.77 percent. As a result, the company’s loan loss provisions surged by more than 60 percent year-on-year to reach 670 crore rupees for the quarter. Provision coverage ratio improved slightly to 56.70 percent.
HDB’s credit costs increased to 2.5 percent compared to 1.8 percent a year earlier. This indicates that a larger portion of the company's earnings is now being set aside to cover potential loan defaults. Despite this, the company has continued to grow its loan book. Gross loans rose 14.3 percent year-on-year to surpass 1 lakh crore rupees. Sequentially, loan growth stood at 2.3 percent.
Disbursements during the quarter came in at 15,171 crore rupees, a decline from 17,643 crore rupees in the previous quarter. The slowdown was primarily due to reduced lending in enterprise finance and asset-based financing, though lending in consumer finance continued to grow. As of June, consumer finance made up 45 percent of total disbursements, suggesting a strategic shift towards retail lending.
Operational revenue increased by 15 percent year-on-year, reaching 4,465 crore rupees in the April to June quarter. Net interest income showed healthy growth of 18 percent, amounting to 2,092 crore rupees. The net interest margin also inched higher to 7.7 percent from 7.6 percent in the previous quarter, showing improved efficiency in lending operations.
However, non-interest income, which includes fees and other services, saw a decline of 2.8 percent compared to the previous quarter. Total assets under management reached 1.09 trillion rupees, registering a 14.7 percent increase from the same period last year. On the flip side, operating expenses also rose sharply by 20.4 percent to 3,733 crore rupees. The rise in costs was attributed to higher finance expenses and impairment losses on financial instruments.
Despite these challenges, HDB Financial maintains a strong capital position. The capital adequacy ratio improved to 20.18 percent, reflecting the lender’s ability to absorb further credit shocks and continue its lending operations.
Investors and market watchers will now look for signs of improved asset quality and reduced provisioning in upcoming quarters. With rising retail exposure and better interest margins, the company may still have the potential for a stronger financial showing if credit quality stabilizes.
For more updates on the financial health of India’s leading NBFCs, stock market news, and IPO trends, follow You Finance on Instagram and Facebook. Stay informed and invest smarter.
