HDB Financial Services Q2 Results: Stock falls below IPO price again ahead of earnings report

Shares of HDB Financial Services Ltd. are back to trading below their IPO price on Wednesday, October 15, ahead of their results for the July-September period.

A consensus estimate of analysts expects HDB Financial's Net Interest Margins (NIMs) to expand between 10 to 12 basis points, compared to the same quarter last year. HDB Financial's NIMs currently stand at 7.7%.

Analysts have a broad range for credit costs estimates. They anticipate credit costs to range between 2.3% to 2.7%, compared to the current 2.5% level.

However, if credit costs are in excess of 2.5%, they could be a drag to HDB Financial's profitability. HDFC Bank's unit is likely to report a 13.9% year-on-year growth in its loan book, while on a sequential basis, that figure is likely to be 2.7%.

Shares of HDB Financial had staged a small rebound from their IPO price on the day of the RBI Monetary Policy on October 1, after remarks made by RBI Governor Sanjay Malhotra.

Governor Malhotra alluded to the draft circular on forms of business and prudential regulations, where a key aspect within those norms, the proposed regulatory restriction on the overlap of business between banks and group entities, has been done away with in the final guidelines. This has now been left to the wisdom of the board of the banks.

The proposed norms were a key overhang on HDB Financial, as the same was highlighted by the company in its Red Herring Prospectus ahead of its IPO as well.

Despite the 2.5% surge in the stock that day, the stock fell for five straight days thereafter, slipping back below its IPO price.

Shares of HDB Financial Services are trading little changed ahead of the earnings announcement, currently trading 0.1% lower at ₹739.45.