HDB Financial Services recently announced its 6MFY'25 results, showcasing robust growth in its core operations but faced challenges due to rising provisions.
Here are some key highlights:
1. Net Interest Income (NII) surged by 28%, reaching โน6,696 Cr, compared to โน5,244 Cr in the same period last year.
2. Total Income grew by 14%, from โน6,902 Cr to โน7,891 Cr, demonstrating solid top-line growth.
3. Despite a 15% increase in Profit before Provisioning, higher provisioning expenses of 55% (โน843 Cr vs. โน543 Cr in 6MFY'24) significantly impacted the bottom line.
4. As a result, the Profit After Tax (PAT) increased by a modest 0.42%, amounting to โน1,173 Cr, compared to โน1,168 Cr in the previous period.
5. On the positive side, the Gross Non-Performing Assets (GNPA) ratio improved, declining from 2.38% to 2.10%, reflecting healthier asset quality.
While the growth in NII highlights the companyโs strong core performance, the sharp rise in provisioning has limited its profitability growth, leaving investors with mixed sentiments.
The management will need to focus on managing risks effectively to translate strong operational performance into improved profitability in the coming quarters.
Valuation
The valuation in the unlisted market remains elevated, with a book value of โน176 and a current unlisted price of โน1,450, resulting in a Price-to-Book (P/B) ratio of 8.28x. However, the IPO is expected to be priced more reasonably, likely in the range of โน800-900.
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