HDB Financial Services Ltd, a subsidiary of HDFC Bank and a prominent player in India’s non-banking financial services (NBFC) sector, is preparing for a major IPO estimated at ₹12,500 crore. Positioned to bolster its capital base and comply with the Reserve Bank of India’s (RBI) mandate for large NBFCs, this IPO is one of the most anticipated in the Indian financial sector. Here’s an in-depth look at what HDB Financial Services brings to the table and what investors need to know.
About HDB Financial Services
HDB Financial Services, a subsidiary of HDFC Bank, provides a diverse range of loan products across Enterprise Lending, Asset Finance, and Consumer Finance, focusing on underserved, low to middle-income households. As one of India’s fastest-growing NBFCs, HDB serves 17.5 million clients as of September 2024, reflecting a robust CAGR of 28.22% in customer acquisition since March 2022, highlighting its strong market presence.
HDB Financial Services IPO Structure and Objective
The ₹12,500 crore IPO is structured with two main components:
- Fresh Issue: New equity shares worth ₹2,500 crore, directed towards expanding HDB Financial’s Tier-I capital base to meet future capital requirements.
- Offer for Sale (OFS): Existing promoter HDFC Bank will offload shares worth up to ₹10,000 crore in this component, which allows HDFC Bank to partially reduce its holding while remaining the primary promoter post-listing.
The RBI mandate for large NBFCs to list by 2025 has driven the decision to go public, and HDB Financial Services will continue as a subsidiary of HDFC Bank even after the IPO.
HDB Financial Services IPO: Financial Highlights, Valuation, and Strategic Use of Proceeds
HDB Financial Services has shown impressive growth with a ₹98,620 crore loan book (CAGR of 20.93%) and ₹90,230 crore AUM as of 2024. In FY24, revenue rose to ₹14,171 crore, and profit surged to ₹2,460 crore (CAGR of 55.98%). HDFC Bank is targeting a valuation of ₹78,000-87,000 crore for HDB Financial, translating to a price-to-book ratio of 4.5 to 5 times, setting up the IPO to attract strong investor interest.
The funds from the fresh issue (₹2,500 crore) will primarily bolster HDB Financial’s Tier-I capital base, allowing it to expand its lending portfolio and address future capital requirements. This infusion will enable HDB to meet the growing demand for personal loans, small business lending, vehicle financing, and loans against property, enhancing its capacity to serve a diverse customer base in India’s NBFC sector.
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HDB Financial Services Key Investment Highlights
HDB Financial Services, backed by HDFC Bank, benefits from strong brand credibility. It has achieved robust customer growth with a 28.22% CAGR from 2022 to 2024, building a broad customer base. Offering a diverse loan portfolio across Enterprise Lending, Asset Finance, and Consumer Finance, HDB caters to underserved segments, fueling high demand. Its financial resilience is evident with FY24 revenue reaching ₹14,171 crore and profit rising to ₹2,460 crore, reflecting steady growth and profitability.
HDB Financial Services Shareholder Quota and Pre-IPO Placement
The IPO will have reserved equity shares for eligible employees and a separate portion reserved for HDFC Bank shareholders, offering a unique opportunity for existing stakeholders to participate. Additionally, the company may consider a pre-IPO placement option after discussions with the lead managers, providing further flexibility in share allocation. Shares will be listed on both the BSE and NSE, ensuring broad investor access.
Conclusion
HDB Financial Services’ ₹12,500 crore IPO offers investors a prime entry into India’s growing NBFC sector. Backed by HDFC Bank, with a strong growth record and focus on financial inclusion, HDB is well-positioned for expansion. This IPO strengthens its capital base while bringing a reputable brand to the public market, meeting regulatory and growth goals. Investors should watch for this listing as it opens for public subscription, offering significant value in the evolving NBFC landscape.
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