HDB Financial shares are well below IPO price, but Jefferies sees 40% upside potential

HDB Financial Services Ltd. can see its stock price re-test its post-listing highs, according to brokerage firm Jefferies, who projected a significant upside for the stock in its latest note.

Jefferies maintained its "buy" rating on HDB Financial with a price target of ₹900 in its note on Wednesday, March 18. The price target implies an upside potential of 40% from Tuesday's closing levels.

In an interaction with the management, Jefferies noted that demand so far has been good in the fourth quarter, and the non-bank lender is hopeful of Assets Under Management (AUM) to grow between 16% to 18% in financial year 2027.

Despite an inch up in the cost of funds, HDB Financial's management expects Net Interest Margins (NIMs) to remain steady, as per Jefferies, who went on to add that collections have improved, and credit costs will dip to 2.4% in the near-term and ease further.

The company's Return on Assets (RoA) could also improve to 2.5% by financial year 2028, as per the management, with earnings also improving over the same timeframe.

Having listed at a premium of 13% to its issue price of ₹740, shares of HDB Financial Services went on to make a post-listing high of ₹891, before correcting and even falling below the issue price.

14 analysts have coverage on HDB Financial, of which 50% or seven of them have a "buy" rating, six say "hold", while one has a "sell" recommendation on the stock. The consensus estimates projects an upside potential of 29% from current levels.

Shares of HDB Financial Services ended 0.4% higher on Tuesday at ₹645, down 13% from its issue price and 28% from post-listing high.