Highlights
| Issue Size –: 168,918,918 shares | Issue Open/Close – 25 June / 27 June, 2025 |
| Price Band (Rs.) 700 – 740 | Issue Size (Rs.) – 125,000 mn |
| Face Value (Rs) 10 | Lot Size (shares) 20 |
HDB Financial Services Limited (HDBFSL), backed by HDFC Bank and incorporated in 2007, is a 7th largest leading, diversified retail-focused non-banking financial company (NBFC) in India and categorized as an Upper Layer NBFC (NBFC-UL) by the RBI.
The Company offer a large portfolio of lending products that cater to a growing and diverse customer base through a wide omni-channel distribution network. Their lending products are offered through three business verticals (i) Enterprise Lending (39.3 pct of Total gross loans) (ii) Asset Finance (38.03 pct of Total gross loans) and (iii) Consumer Finance (22.66 pct of total gross loans).
HDBFSL also offer business process outsourcing (BPO) services such as back-office support services, collection and sales support services to their Promoter as well as fee-based products such as distribution of insurance products primarily to their lending customers.
They primarily cater to underserved and underbanked customers in low to middle-income households with minimal or no credit history. As at FY25, over 80% pct of their branches are located outside India’s 20 largest cities by population (based on the 2011 census report) and over 70 pct are located in Tier 4+ towns. Their customers mainly comprise of salaried and self-employed individuals, as well as business owners and entrepreneurs. Their aggregated average ticket size stood at approximately Rs. 165,000 as at FY25.
Out of the total proceeds of Rs. 125,000 mn, Rs. 25,000 mn would be utilised for augmentation of Company’s Tier – I Capital base to meet Company’s future capital requirements including onward lending under any of Company’s business verticals i.e. Enterprise Lending, Asset Finance and Consumer Finance and Rs. 100,000 mn would go towards existing promoter selling shareholders of the company.
Key Highlights
- NBFCs have evolved in size, operations, technological sophistication and variety of financial services and products, growing from under Rs. 2 trillion AUM in FY00 to Rs. 48 trillion in FY25. In the financial sector ecosystem, NBFCs compete with banks, micro-finance companies, digital lending platforms and informal financiers. During FY19 to 2025, NBFC credit grew at an estimated CAGR of 13.2 pct and it is expected to grow at 15-17 pct between FY25 and FY28.
- The company is a diversified NBFC and their goal is to have an optimal mix across products, while maintaining a balanced approach to secured and unsecured loans in loan book. Their Secured loans represented 73.01 pct of Total Gross Loans and unsecured loans represented 26.99 pct of Total Gross Loans as at FY25.
- They have a hybrid underwriting structure depending on the product, customer segment and ticket size. They have implemented a hybrid credit approach with a centralised credit assessment and underwriting unit for Consumer Finance products (where ticket size is small and tenure is short) and decentralised for Enterprise Lending and Asset Finance products (where ticket size is bigger and tenure is longer).
- HDBFSL has diversified liability franchise supported by a strong credit rating of AAA stable. This has allowed them to fund operations at competitive rates and tenors across fixed and floating-rate debt instruments. Their average cost of borrowings stood at 7.90 pct as at FY25, which is the sixth lowest amongst their competitors.
- The company use prudent stance on asset-liability management (ALM) strategy which aims at managing risk and providing a comprehensive and dynamic framework for measuring, monitoring and managing liquidity and interest rate risks. This strategy helps to reduce the liquidity risk by mitigating the mismatches in the maturity pattern of assets and liabilities and result of this the company has not raised any equity in the last 8 years.
- HDBFSLs key growth strategies includes (i) Diversify and expand addressable customer segments by widening and enhancing product offering (ii) Continue to expand pan-India omni-channel distribution network (iii) Continue to invest in technology, data analytics and artificial intelligence to further improve customer experience, increase organisational productivity and decrease costs (iv) Continue to diversify borrowing profile to optimise borrowings costs (v) Further strengthen and improve robust risk management framework as well as underwriting and collections capabilities to minimise the risk of credit losses (vi) Continue to attract, upskill and retain talented employees by strengthening organizational culture.
- The company’s total gross loans grew 23.54 pct CAGR over FY23-FY25 and profit grew 5.38 pct CAGR over same year. However, GNPA declined to 2.26 pct in FY25 from 2.73 pct in FY23 and NNPA rose to 0.99 pct in FY25 from 0.95 pct.
Key Risk
- The company outsource certain operational activities to third-party IT service providers and collection agents. Any lapse by such third-party service providers may have adverse consequences on the business and reputation.
- If customers transfer their loans from HDBFSL to other banks or financial institutions, company’s Total Gross Loans and assets under management may decrease or fail to increase.
Financial Performance
| Particulars | FY23 | FY24 | FY25 |
| Number of Customers (mn) | 12.2 | 15.8 | 19.2 |
| Total Gross Loans (Rs. mn) | 700307 | 902179 | 1068776 |
| Secured Loans as % of Total Gross Loans | 72.87% | 71.34% | 73.01% |
| Net Interest Income (Rs. mn) | 54159 | 62924 | 74456 |
| Net Total Income (Rs. mn) | 62570 | 73573 | 86935 |
| Profit (Rs. mn) | 19594 | 24608 | 21759 |
| EPS (Rs.) | 24.78 | 31.08 | 27.4 |
| Average Yield % | 13.59% | 13.92% | 14.04% |
| Average Cost of Borrowings % | 6.76% | 7.53% | 7.90% |
| Net Interest Margin % | 8.25% | 7.85% | 7.56% |
| Cost to Income Ratio % | 39.00% | 42.72% | 42.84% |
| Operating Expense Ratio | 3.71% | 3.92% | 3.78% |
| Credit Cost Ratio | 2.03% | 1.33% | 2.14% |
| GNPA % | 2.73% | 1.90% | 2.26% |
| NNPA % | 0.95% | 0.63% | 0.99% |
| PCR % | 65.10% | 66.82% | 55.95% |
| ROE % | 18.68% | 19.55% | 14.72% |
| ROA % | 2.97% | 3.03% | 2.16% |
| Debt/Equity (x) | 5.85 | 5.81 | 5.26 |
Valuation
HDB Financial Services Limited (HDBFL) is a leading NBFC is backed by strong parentage of HDFC Banks that caters to the growing needs of an aspirational India, serving both individual & business clients. Under HDFC Bank’s parentage, they have embedded a philosophy of balancing between delivering long-term sustainable growth and profitability. At the upper end of the price band of Rs. 740, the issue priced at FY25 P/B of 3.87x post issue. The issue appears to be fully priced. However, considering the pedigree, one could subscribe in moderation from a longer-term perspective.
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