HDB Financial Services IPO: A Deep Dive into India’s Emerging Lending Powerhouse

India’s financial markets are gearing up for one of the most awaited IPOs of 2025. HDB Financial Services Ltd, a prominent non-banking financial company (NBFC) and a wholly owned subsidiary of HDFC Bank, is hitting the primary markets between June 25–27, 2025.

With an IPO size of ₹12,500 crore and a diversified business model spanning loans, insurance distribution, and BPO services, this public issue could offer long-term investors a rare opportunity to participate in the growth of one of India’s largest unlisted NBFCs.

IPO Snapshot

Company Overview

HDB Financial Services operates as a diversified NBFC offering retail loans, MSME lending, and fee-based services. Backed by HDFC Bank’s 94% stake, the company has built a reputation for serving India’s rising credit demand across Tier 2-4 cities.

As of FY25, HDB manages over ₹1.03 lakh crore in AUM, with about 71% of the loan book secured by tangible assets like vehicles or property.

The business is spread across three major income streams:

• Lending business (core portfolio)
• BPO services (operations and collection for HDFC Bank)
• Insurance product distribution (IRDAI-licensed corporate agent for HDFC Life & Ergo)

Business Segments Breakdown

1. Consumer Loans

• Products: Personal loans, auto/two-wheeler loans, consumer durables, microfinance
• Target: Salaried and low-income borrowers across urban/rural segments

2. Enterprise Loans

• Products: Unsecured business loans, property/rental backed credit
• Target: Micro and small businesses seeking working capital

3. Asset Finance

• Products: Commercial vehicle loans, construction equipment, tractors
• Target: Self-employed and agricultural borrowers

Other Income Streams

BPO Services

• Operates 18 call centers with 5,500 seats
• Supports collections and backend ops for HDFC Bank
• Contributes 7.3% to total income (FY25)

Insurance Distribution

• Registered corporate agent under IRDAI
• Distributes policies of HDFC Life and HDFC Ergo
• Adds to non-interest, stable income

Financial Performance (FY20–FY25)

Loan Book Growth

CAGR (FY22–25): 21.8%

Net Interest Income (NII)

Grew from ₹5,037 Cr in FY22 to ₹7,446 Cr in FY25

CAGR (FY22–25): 13.9%

Net Profit Growth

Rose from ₹1,011 Cr (FY22) to ₹2,176 Cr (FY25)

CAGR (FY22–25): 29.1%

Profit Performance (FY20–FY25)

Operational Metrics (FY20–FY25)

Valuation & Peer Comparison

At the upper band valuation of ₹58,900 crore, HDB Financial Services is entering the market without a declared P/E or P/B ratio. However, by using its FY25 EPS (₹27.3) and NAV per share (₹198.8), we can gauge implied valuation multiples:

• Implied P/E: ~27.1x
• Implied P/B: ~3.72x

Here’s how HDB stacks up against other listed NBFC peers:

Takeaway:

• Asset Quality: HDB’s Net NPA of 0.99% is competitive, better than most peers excluding Bajaj and Sundaram.
• Profitability: ROE of 14.72% is respectable, aligned with peer median.
• Valuation: Implied multiples are reasonable, not overly stretched.

This data positions HDB as a mid-premium, well-run NBFC - offering scale, clean books, and consistent ROE at a justifiable valuation.

IPO Investment Merits

• Strong parentage (HDFC Bank) ensures governance and funding access
• Diversified lending book with 71% secured loans
• Tier 3–4 branch dominance taps into India’s underbanked demand
• Strong profit growth with controlled costs
• Low credit risk despite expansion into semi-urban markets

Risks to Watch

• NIM compression due to competitive retail lending rates
• High OFS component (₹10,000 Cr) means limited fresh capital
• 29% of book is unsecured, adding yield but also volatility
• Fee income streams (BPO + insurance) still minor contributors

Should You Invest?

If you’re a long-term investor seeking exposure to a high-growth NBFC with strong fundamentals, the HDB Financial IPO is worth considering. It offers:

• Visibility into India’s expanding rural credit market
• A diversified revenue model
• Proven track record of profitable growth
• Strong risk management under HDFC Bank’s framework

It may not be a “listing pop” candidate, but it offers steady compounding potential over 5–10 years.

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Disclaimer: This article is for informational and educational purposes only and does not constitute a recommendation to invest. Please consult a SEBI-registered investment advisor before making any investment decisions. Finnovate does not offer product-specific investment advice.