Why Did HDB Financial's Net Profit Drop 2.4% to Rs 567.7 Crore in Q1?
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Synopsis
HDB Financial, a subsidiary of HDFC Bank, has reported a net profit of Rs 567.7 crore for Q1 FY26, a decline of 2.4% compared to the previous year. Despite strong revenue growth, increased provisioning has impacted the bottom line. Explore the implications of these results on the company’s future.
Key Takeaways
- Net profit decreased by 2.4% YoY to Rs 567.7 crore.
- Sequential profit increased by 7% from the previous quarter.
- Net interest income rose by 18.3% YoY.
- Loan losses increased to Rs 670 crore.
- Total gross loans grew by 14.3% to Rs 1,09,342 crore.
Mumbai, July 15 (NationPress) - HDB Financial, a subsidiary of HDFC Bank and a newly listed upper-layer NBFC, reported a net profit of Rs 567.7 crore for the quarter ending June 30 (Q1 FY26), marking a 2.4 percent decline from Rs 581.7 crore in the same quarter last year (Q1 FY25).
Despite this annual dip, there was a sequential improvement, as profits increased by 7 percent from Rs 530.9 crore in the March quarter of FY25, according to its stock exchange disclosure.
The decline in year-on-year (YoY) profit occurred despite robust growth in revenue and net interest income, largely due to heightened provisioning impacting the bottom line.
The company's net interest income (NII), which reflects the difference between interest earned and interest paid, surged 18.3 percent YoY to Rs 2,091.8 crore.
This figure also exceeded Rs 1,972.8 crore from the previous quarter, as indicated in the filing.
Total operational revenue rose 15 percent YoY to Rs 4,465.4 crore, with a 4.6 percent increase compared to the March quarter.
HDB's pre-provisioning operating profit for the June quarter reached Rs 1,402 crore, a 17.2 percent increase from Rs 1,196 crore a year prior.
However, the company's loan losses and provisions escalated to Rs 670 crore in Q1 FY26, up from Rs 412 crore in Q1 FY25.
The provisioning coverage ratio on stage 3 assets decreased to 56.70 percent from 60.24 percent a year ago.
HDB Financial's loan book remained robust, with total gross loans advancing by 14.3 percent to Rs 1,09,342 crore as of June 30, compared to Rs 95,629 crore the previous year.
Correspondingly, its assets under management (AUM) increased by 14.7 percent to Rs 1,09,690 crore.
Shares of HDB Financial, which began trading on the Indian stock market on July 2, ended the day slightly lower at Rs 841.10 on the Bombay Stock Exchange (BSE), reflecting a 0.4 percent drop.
Despite this decrease, the stock has risen nearly 14 percent from its IPO price of Rs 740.
Point of View
HDB Financial's results reflect the duality of growth and challenge in the current financial landscape. While revenue and net interest income have seen positive trends, the increased loan provisions signal caution. The company's ability to navigate these challenges will be critical in maintaining investor confidence and driving future growth.
NationPress
16/07/2025
Frequently Asked Questions
What caused HDB Financial's net profit decline?
The 2.4% decline in net profit was primarily due to increased provisioning, despite healthy growth in revenue and net interest income.
How much did net interest income increase?
HDB Financial's net interest income (NII) rose by 18.3% YoY to Rs 2,091.8 crore.
What was the total revenue from operations?
Total revenue from operations grew 15% year-on-year to Rs 4,465.4 crore.
How did the company's loan losses change?
Loan losses and provisions increased significantly to Rs 670 crore in Q1 FY26 from Rs 412 crore in Q1 FY25.
What is the current status of HDB Financial's shares?
HDB Financial's shares ended at Rs 841.10, down 0.4% but still 14% above its IPO price.
