HDB Financial Services IPO 2024: Key Details and Growth Potential
HDFC Bank-backed, wholly-owned, and 94.6%-holding NBFC in a retail-focused bank, HDB Financial Services is preparing to list its much-anticipated IPO. The firm has registered gradual growth in lending business along with facing the trouble in its BPO venture. So, let us see some detail information on HDB’s upcoming IPO and what investors can make from it.
HDB Overview
HDB Financial Services boasts a ₹98,624.2 crore loan book, targeting low- to middle-income households and underserved segments, including salaried individuals, MSMEs, and self-employed professionals. Its operations span two primary segments:
Lending Business:
Enterprise Lending: Secured and unsecured loans for MSMEs.
Asset Finance: Loans for income-generating assets like vehicles and equipment.
Consumer Finance: Loans for personal needs and consumer goods.
BPO Services:
It serves as the BPO arm of HDFC Bank, providing services such as loan processing and collections.
The company’s phygital model-which combines physical branches with digital channels-allows it to serve customers through a mix of in-person services and tech-enabled platforms.
Key Highlights of the IPO
IPO Size: ₹12,500 crore (estimated).
Shareholder Reservation:
HDFC Bank shareholders will have a 10% reservation, allowing them to apply under the shareholder category for up to ₹2,00,000.
Target Segments: Retail, MSMEs, and underserved credit markets.
The IPO will help unlock value for HDFC Bank, enabling it to realize value through stake sales while rewarding existing shareholders.
Industry Outlook
The Indian NBFC sector is expected to grow faster than systemic credit, driven by increased banking penetration, consumer demand, and MSME financing.
Gross Loan AUM Growth: From ₹24 trillion (FY19) to ₹41 trillion (FY24), with a CAGR of 11%.
Future Projections: CRISIL expects the NBFC sector to grow at 15-17% annually from FY24 to FY27, led by retail and MSME loans.
Financial Performance
HDB Financial Services has consistently grown its loan book and customer base while improving asset quality.
Revenue and Profit (₹ crore):
| Particulars | FY22 | FY23 | FY24 | CAGR (FY22-24) | 6M FY24 (Sep 30) |
|---|---|---|---|---|---|
| Revenue from Operations | 11,306.2 | 12,402.8 | 14,171.1 | 11.9% | 7,890.6 |
| Profit After Tax (PAT) | 1,011.4 | 1,959.3 | 2,460.8 | 34.5% | 1,172.0 |
Segmental Performance:
| Segment | FY22 | FY23 | FY24 | CAGR (FY22-24) |
|---|---|---|---|---|
| Lending Revenue | 8,942.9 | 9,769.0 | 12,221.6 | 16.9% |
| BPO Revenue | 2,363.4 | 2,623.9 | 1,949.6 | -9.1% |
The lending business dominates HDB’s operations, contributing nearly 90% of revenue with significantly higher profit margins compared to its BPO division.
Profitability and Asset Quality
| Metric | FY22 | FY23 | FY24 | 6M FY24 (Sep 30) |
|---|---|---|---|---|
| Net Interest Margin (%) | 8.2% | 8.3% | 7.9% | 7.6% |
| Operating Expense Ratio | 3.2% | 3.7% | 3.9% | 3.8% |
| GNPA (%) | 4.5% | 2.7% | 2.1% | 2.1% |
| NNPA (%) | 2.3% | 1.0% | 0.6% | 0.8% |
| ROE (%) | 11.3% | 18.7% | 19.6% | 16.4% |
The company has improved its asset quality with GNPAs falling to 2.1% in FY24, and ROE rising to 19.6%, showcasing effective risk management.
Competitive Landscape
HDB Financial Services operates in a competitive environment alongside players like Bajaj Finance, Sundaram Finance, and Shriram Finance.
| Metric | HDB | Bajaj Finance | Sundaram Finance | Cholamandalam |
|---|---|---|---|---|
| Gross Loan Book (₹ Cr) | 90,217.9 | 247,852.5 | 42,520.6 | 146,945.0 |
| PAT (₹ Cr) | 2,460.8 | 12,644.1 | 1,454.0 | 3,422.8 |
| ROE (%) | 19.6% | 20.5% | 16.9% | 20.2% |
| NNPA (%) | 0.6% | 0.5% | 0.6% | 1.3% |
HDB’s strong ROE and asset quality highlight its effective equity utilization and risk management. However, it operates in a price-sensitive market where larger peers have an edge in profitability and cost efficiency.
Key Risks
Economic Risks: A downturn or rising interest rates may impact borrowing costs and defaults.
High Competition: The retail lending space is crowded with established players.
Promoter Dependency: Any challenges for HDFC Bank could indirectly affect HDB’s operations.
Benefits for HDFC Bank Shareholders
The existing HDFC Bank shareholders will get a 10% reservation in the IPO, thus giving them an opportunity to invest further in HDB at a capped bid amount of ₹2,00,000.
Value Unlocking: The IPO will bring one-time gains to HDFC Bank through stake sales and increase its market cap.
HDB Financial Services’ IPO represents a significant step in the growth journey of the company. The robust loan book, strong asset quality, and consistent profitability make it very well positioned in the NBFC space. Challenges like rising borrowing costs and stiff competition would continue to persist; however, HDB’s diversified loan portfolio, phygital approach, and backing by HDFC Bank provide a solid foundation for long-term growth.
This would give investors an opportunity to be part of one of India’s leading NBFCs with the added advantage of preferential access for HDFC Bank shareholders.
Disclaimer: Stocks today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
Next Story
Zomato Shares Rise Over 4% as Magicpin Gears Up for 2025 IPO
Shares of Zomato Jump as Magicpin Confirms 2025 IPO Plan Zomato’s stock has surged by more than 4% in two days after it was reported that Magicpin-the leading hyperlocal retail platform-is planning an IPO in 2025. For Magicpin, and especially for its stakeholders, including Zomato, which owns a 16.95% stake in shares, this would be a complete game-changer. What is Magicpin? Magicpin connects customers with local retailers across categories
Indo Farm Equipment IPO 2025: Key Highlights to Know Before Subscribing
Indo Farm Equipment IPO: Key Highlights to Know Before Subscribing Indo Farm Equipment, the well-known tractor and pick-and-carry crane manufacturer, is preparing to open its Initial Public Offering (IPO) on December 31. The IPO will be open for subscription until January 2. Indo Farm Equipment has been in the industry for more than two decades and has become a household name in agricultural and construction machinery. The company also
