IPO closes on 27 Jun'25
HDB Financial Services Ltd
Minimum Investment
₹ 14,800 / 20 shares
Grey market premium
₹ 52 (7% premium)
Our Verdict:
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- HDB Financial Services Ltd (HDB) has shown strong recovery in both asset growth and asset quality post-pandemic. The company has a diversified product portfolio, with commercial vehicle and construction equipment financing making up the majority of its AUM as of March 2025. It has also expanded into consumer durable financing, gold loans, digital products loans and other related segments.
- From a valuation perspective, the IPO seems reasonably priced with a price-to-earnings (P/E) ratio of 27x based on FY25 earnings. HDB can command better valuations due to its strong parentage of HDFC Bank, which allows it to raise funds at competitive rates and enjoy a low cost of funds.
- While the fair valuation offers potential upside, this IPO is better suited for long-term investors focused on sustained growth rather than quick listing gains.
About the company
Founded in
4 Jun'07
Managing director
Ramesh Ganesan
- HDB, a subsidiary of HDFC Bank, is the seventh-largest diversified retail-focused non-banking financial company (NBFC) in India, with a gross loan book size of Rs 902.2 billion as of 31 March 2024. It is classified as an Upper Layer NBFC (NBFC-UL) by the RBI.
- HDB offers a wide range of lending products through three key business verticals: Enterprise Lending, Asset Finance and Consumer Finance. It caters to a diverse customer base, focusing on underserved and underbanked individuals from low to middle-income households, many of whom have minimal or no credit history. The products are distributed via an extensive omni-channel network.
STRENGTHS
- Solid AUM Growth: HDB’s Assets Under Management (AUM) have grown at a CAGR of 23.71%, reaching Rs 1,072.6 billion as of March 2025, marking significant growth from March 2023.
- Strong Financial Performance: HDB's total gross loan growth, operating efficiencies and superior asset quality have contributed to a Return on Assets (ROA) of 2.16% and a Return on Average Equity (ROAE) of 14.72% for FY25. These figures rank seventh and fifth, respectively, among its NBFC peers.
- Expanding Customer Franchise: HDB serves 19.2 million customers as of March 2025, making it the second largest and third fastest-growing customer base in the industry, with a CAGR of 25.45% over the past two years.
- Extensive Distribution Network: HDB operates 1,771 branches across 1,170 towns and cities in 31 States and Union Territories. This is supported by partnerships with over 80 brands and OEMs and an extensive distribution network of more than 1,40,000 retailers and dealer touchpoints as of March 2025.
- Strong Credit Ratings: With AAA/Stable ratings from CRISIL and CARE, HDB benefits from access to competitive funding rates. Its average borrowing cost of 7.90% ranks sixth lowest among peers.
- Asset Quality: The loan portfolio has demonstrated resilience through multiple credit cycles. As of March 2025, Gross NPA stood at 2.26% and Net NPA at 0.99%. HDB follows a prudent provisioning approach, with a Provision Coverage Ratio of 55.95% (third highest among peers) and provisioning at 3.31% of the loan book.
RISK FACTORS
- Potential Impact of Stake Reduction: HDFC Bank holds a 94.09% stake in HDB. However, a draft RBI circular, released on 4 October 2024, mandates the promoter reduce its stake to below 20% within two years of the proposed rules. This aims to eliminate overlap in core business activities between a bank and its group entities. If implemented, the reduction in ownership could impact business operations and lead to volatility in its share price.
- Rising Gross Stage 3 Loans: HDB has experienced an increase in Gross Stage 3 Loans, rising from 1.90% at the end of March 2024 to 2.26% by March 2025. Similarly, Net Stage 3 loans increased from 0.63% to 0.99%, indicating potential challenges in asset quality.
- High Proportion of Unsecured Loans: Unsecured loans make up 26.99% of HDB's loan book. These loans carry higher credit risk compared to secured loans, as they are not backed by realisable collateral, making recovery more challenging in the event of default.
- Credit Risk from New-to-Credit Borrowers: At the end of March 2025, new-to-credit borrowers represented 11.57% of HDB’s loan book. Proper credit assessment of these borrowers is crucial, as they pose a higher risk of default due to limited or no credit history.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 12,500 crore
Fresh Issue
₹ 2,500 crore
OFS
₹ 10,000 crore
Price range
₹ 700 - 740
Lot size
20 shares
Issue Objective
The net proceeds from the fresh issue will be used to strengthen the company's Tier-I capital base, enabling it to meet future capital requirements, including lending across its business verticals such as Enterprise Lending, Asset Finance and Consumer Finance.
Dates
Bidding open
25 Jun'25
Bidding close
27 Jun'25
Allotment date
30 Jun'25
Refund date
1 Jul'25
Listing
2 Jul'25
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
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