IPO Note : HDB Financial Services Ltd by Geojit Financial Services Ltd
A Diversified Lender– Powered by HDFC...
HDB Financial Services Ltd (HDB), established in 2007, is a retail-focused, upper-layer NBFC as classified by the RBI. It operates across three lending segments—enterprise (~39%), asset finance (~38%), and consumer finance (~23%)—primarily serving low- to middleincome customers with limited credit histories. As of March 31, 2025, the average loan ticket size stood at ~Rs.1.65 lakh. HDB also provides BPO services to its promoter and distributes insurance products to their borrowers. Its extensive network includes 1,771 branches across 1,170 locations in 31 states and union territories, with over 80% in non-metro areas and more than 70% in Tier-4 and smaller towns.
* As of FY25, India’s NBFC sector reported an AUM of Rs.48 trillion, having grown at a CAGR of 13.2% since FY19, and is expected to grow at 15–17% over FY25–FY28, driven by growth across retail, MSME, and corporate segments. (source: CRISIL Intelligence).
* The total gross loans of HDB grew at a CAGR of 23.5% over FY23-25 and stood at Rs.1,068.8 bn as of March 31, 2025. The loan portfolio is highly granular, with the top 20 customers accounting for less than 0.34% of total gross advances.
* HDB has served 19.2 mn customers in FY25, registering a CAGR of 25.45% over FY23- 25—highlighting its rapid customer base expansion.
* As of March 31, 2025, secured loans accounted for ~73% of HDB’s total gross loans, while unsecured loans comprised the remaining 27%, reflecting a predominantly collateral-backed lending portfolio.
* Driven by consistent growth in total gross loans, enhanced operating efficiencies, and strong asset quality, HDB achieved a Return on Assets (RoA) of 2.16% and a Return on Average Equity (RoE) of 14.72% for FY25.
* HDB’s asset quality remained strong as of March 2025, with GNPA at 2.3% and NNPA at 1.0%, ranking 4th and 5th lowest among NBFC peers.
* As of March 2025, HDB reported an average cost of borrowing of 7.9%, supported by a diversified liability base, strong AAA credit ratings, prudent leverage of 5.85x, and a healthy CRAR (capital to risk assets ratio) of 19.22%.
* At the upper price band of Rs.740, HDB is available at a P/B ratio of 3.4x (FY25-post issue basis), which appears to be fairly priced compared to its peers.
* Given its diversified lending portfolio, strong parentage support, omni-channel distribution platform, granular lending model, customer expansion, asset quality and better growth prospects, we recommend a "Subscribe" rating on a long term basis.
Purpose of IPO
The issue is primarily a fresh issue of Rs. 2,500cr and OFS (offer for sale) of Rs.10,000cr, totalling issue size to Rs.12,500cr. The net proceeds from the fresh issue will be utilized to meet future capital requirements towards onward lending.
Key Risks
* A further stake sale by parent HDFC Bank may create an overhang on the stock price, potentially impacting investor sentiment.
* In FY25, Gross Stage 3 Loans rose to 2.26% from 1.90% a year earlier, indicating increased credit risk.
* Adverse regulatory changes or non-compliance may impact the business.
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SEBI Registration Number: INH200000345
