Summary
HDB Financial Services Limited - Q3 FY26 Earnings Call Summary Wednesday, January 14, 2026, 18:30 hrs IST
Event Participants
Executives 2 G Ramesh (MD & CEO), Jaykumar Shah (CFO)
Analysts 8 Abhijit Tibrewal, Avinash Singh, Bhaskar Basu, Chintan Shah, Jay, Kunal Shah, Nischint Chawathe, Prithviraj Patil, Raghav, Shreya Shivani, Sucrit D. Patil, Viral Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Customer Franchise | 22 million | +19.3% YoY, +4.8% QoQ; reflects growth in aspirational India segment. |
| Total Gross Loan Book | ₹1,14,577 crores | +12.2% YoY, +2.8% QoQ; Secured loans comprise 74% of the total book. |
| Disbursements | ₹17,917 crores | +14.9% QoQ; All-time high driven by Consumer Finance and asset-backed business. |
| Net Interest Income (NII) | ₹2,285 crores | +22.1% YoY, +4.2% QoQ; driven by book growth and yield management. |
| Net Interest Margin (NIM) | 8.09% | +63 bps YoY; Improved due to product mix balancing and focused origination. |
| Cost-to-Income | 39.5% | -300 bps YoY (adjusted); Reduced due to operational efficiencies, excluding one-time labor code impact. |
| Reported PAT | ₹644 crores | +36% YoY; Adjusted for labor code one-time provision (₹56 cr), growth was +45% YoY. |
| Gross Stage 3 (GNPA) | 2.81% | Flat QoQ; Management noted stabilization in CV/CE and unsecured SME portfolios. |
| Capital Adequacy (CRAR) | 21.81% | Remains well-capitalized with a positive liquidity mismatch up to five years. |
Geographic & Segment Commentary
- Consumer Finance: This segment led growth with a 17.3% QoQ increase in the book, fueled by Auto, 2-wheeler, and Consumer Durables. Performance was driven by a strong festive season surge, pent-up demand, and market response to GST cuts. Management expects this momentum to continue into the next quarter.
- Enterprise Lending: Gold loans grew by 17.8% QoQ, while LAP and Enterprise Business Loans showed moderate growth. Portfolio quality in unsecured business has stabilized after several quarters of pressure, with management now looking to return to a growth trajectory.
- Asset Finance: CV and CE (Commercial Vehicle/Equipment) books showed moderate growth with early signs of asset quality improvement in the 0-90 DPD buckets. Management anticipates positive momentum driven by infrastructure spending and an improving rural economy.
Company-Specific & Strategic Commentary
- New Labor Code Impact: The company recognized a one-time provision of ₹60.52 crores (₹56 crores in the lending business) following the notification of four new labor codes. This is treated as a past service cost under IND-AS 19, affecting gratuity and employee benefits.
- Product Mix Optimization: Secured loans increased by 90 bps over the last two quarters to reach 74% of the total book. Management is strategically balancing the mix to maintain NIMs in the ~8% range while awaiting the right time to re-accelerate unsecured SME growth.
- Digital & Operational Efficiency: Branch count was slightly rationalized to 1,744 (covering 1,165 towns) to improve viability and pin-code coverage. Investing in tech remains a priority, with the lending cost-to-asset ratio (ex-one-time items) holding flat at 3.7%.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Loan Book Growth | Nominal GDP + 6-7% | Targeted medium-term growth as unsecured segments return to trajectory. |
| Net Interest Margin | 7.9% - 8.1% | Expected to remain range-bound despite competitive pressure on yields. |
| Credit Cost | Lower than 2.5% | Focus on shaving off bps as CV/CE and MSME segments stabilize further. |
| Product Mix | 50-50 New vs Used CV | Long-term target over 3-4 years to shift toward higher-yield used vehicle financing. |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality (CV/CE) | While stabilizing, Stage 3 assets in the vehicle segment remain at 2.81%, requiring continued focus on recoveries. |
| Regulatory (Labor Codes) | The impact of ₹61 crores is based on current draft rules; finalization of State/Central rules could lead to further adjustments. |
| Yield Compression | Intense competition and pricing transparency in the vehicle and SME segments may pressure yields in upcoming quarters. |
Q&A Highlights
Asset Quality & Slippages
- Question: What is the trend in CV/CE and unsecured MSME pain? (Abhijit Tibrewal)
- Answer: CV/CE has stabilized in the 90+ DPD zone, and recovery in early buckets (0-90 DPD) has improved. Unsecured SME pain has clearly started easing after 5-6 quarters of stress (Jaykumar Shah).
Impact of GST and Pricing
- Question: How did GST cuts impact ticket sizes in Auto/2-wheelers? (Kunal Shah/Shreya Shivani)
- Answer: Average ticket sizes in these segments saw a ~5% reduction because vehicle prices fell. However, overall ATS rose QoQ because “New” vehicle sales (higher value) outpaced “Used” sales during the festive peak (G Ramesh/Jaykumar Shah).
Margins & Borrowing Costs
- Question: Will the focus on margins lead to lower growth? (Avinash Singh)
- Answer: Margin focus does not directly hinder growth; the current 8.09% NIM is sustainable. As unsecured Relationship Personal Loans and Business Loans return to growth, they will support the top line (Jaykumar Shah).
Labor Code Provison
- Question: Is the ₹61 crore impact recurring? (Chintan Shah)
- Answer: This is a one-time retrospective provision based on actuarial valuations of the new code. The company has fully provided based on current clarifications and will monitor further developments (G Ramesh/Jaykumar Shah).
Key Takeaway
HDB Financial Services delivered a resilient Q3 FY26, characterized by record quarterly disbursements of ₹17,917 crores (+15% QoQ) and a significant 45% YoY growth in adjusted PAT (excluding labor code impacts). The company successfully expanded its NIM to 8.09% through disciplined product mix management, even as it navigated a one-time ₹60.52 crore provision for the New Labor Codes. Strategic focus remains on recovering the CV/CE and unsecured SME portfolios, which showed signs of stabilization this quarter, and increasing the secured loan mix (now at 74%). With a robust capital adequacy of 21.81% and a growing franchise of 22 million customers, management is positioned to accelerate growth at a rate of nominal GDP plus 6-7% as macro conditions and rural demand improve. The outlook remains cautiously optimistic with a focus on reducing credit costs toward historical norms.
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