New Delhi: After Steller debut Emkay Global has shown confidence in HDB Financial Services, setting a target price of Rs 900 per share and giving a ‘Buy’ rating. This target shows a possible upside of about 22 percent from the IPO issue price of Rs 740.
Strong Market Debut
On July 2, HDB Financial Services made an strong debut on the stock market, listing at Rs 835 per share—a 13 percent premium over its IPO price. This strong start shows robust investor interest and confidence in the company’s future.
Why Emkay is Bullish on HDB Financial
Emkay’s optimism is rooted in several core strengths:
Diversified Lending: HDB Financial has built a broad, strong lending business, serving over 1.9 crore customers across 1,770 branches in 31 states and union territories. Its top 20 borrowers make up just 0.34 percent of total assets, minimizing concentration risk.
Focus on Underbanked Segments: The company targets low- and middle-income groups, especially in remote and semi-urban areas, with 70 percent of branches in tier 4 towns and beyond.
Experienced Leadership & Parentage: The management team has deep experience, with many leaders serving over a decade. HDFC Bank’s backing brings credibility, funding advantages, and best-in-class governance.
Consistent Profits & Growth: Despite challenges like demonetization, GST rollout, and Covid-19, HDB Financial has remained profitable since 2009-10 and hasn’t needed external capital since 2017.
Growth Prospects: Emkay expects HDB’s assets under management (AUM) to grow at a 20 percent CAGR over FY25-28, reaching Rs 1.8 lakh crore, with earnings per share (EPS) compounding at 27 percent annually. The brokerage forecasts return on assets (RoA) of 2.7 percent and return on equity (RoE) of 17 percent by March 2028.
Favorable Environment: Recent RBI Rate cuts and moderating credit costs are expected to further boost profitability and growth.
Valuation
At its listing price, HDB Financial trades at a one-year forward price-to-book value of 3.4x—lower than Bajaj Finance and Chola Investment, but higher than Shriram Finance. Emkay’s target price of Rs 900 is based on a projected FY27 price-to-book multiple of 3x.
Risks to Watch
A major regulatory risk is the RBI’s draft proposal that could require HDFC Bank to reduce its stake in HDB Financial if business overlaps are restricted.
Emkay Global sees HDB Financial as a well-managed, growth-focused NBFC with strong parentage and a clear strategy to serve India’s underbanked. Its robust fundamentals, diversified portfolio, and experienced leadership make it a good choice for investors looking for medium- to long-term growth, especially after its premium market debut.
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