HDB Financial Services: 7 Reasons Why ₹12,500 Crore IPO is India’s Biggest NBFC Offering

HDB Financial Services launches ₹12,500 crore IPO June 25-27, 2025, at ₹700-740 price band. HDFC Bank subsidiary serves 17.5 million customers through 1,772 branches across India. Leading NBFC offers enterprise lending, asset finance, consumer finance with AAA credit rating and strong market position.

Table of Contents

1. Introduction: India’s Leading NBFC Goes Public
2. IPO Details & Investment Information
3. Company Profile & Business Overview
4. Financial Performance & Growth Metrics
5. Business Segments & Market Position
6. Competitive Advantages & Strengths
7. Risks & Investment Considerations
8. Conclusion & Investment Verdict

Introduction: India’s Leading NBFC Goes Public

HDB Financial Services Limited is preparing for a landmark IPO worth ₹12,500 crore, marking one of India’s largest NBFC public offerings in recent history. The company, incorporated in 2007, has established itself as a retail-focused non-banking financial company (NBFC) under the HDFC Bank umbrella.

HDB Financial Services (HDBFS) is a leading Non-Banking Financial Company (NBFC) that caters to the growing needs of an Aspirational India, serving both Individual & Business Clients. As a subsidiary of HDFC Bank Limited, the company benefits from strong brand recognition and extensive distribution capabilities across the Indian financial services landscape.

HDB Financial Services Quick Facts Table

The initial public offering of HDB Financial Services is set to open for bidding on June 25, 2025, closing on June 27. The company is offering shares priced between ₹700 and ₹740, with a minimum application of 20 equity shares, making it accessible to retail investors while positioning for significant institutional participation.

IPO Details & Investment Information

The IPO aims to raise ₹12,500 crore, including a fresh issue of ₹2,500 crore and an offer-for-sale (OFS) of 13,51,35,135 shares worth ₹10,000 crore by its parent HDFC Bank. This structure provides both growth capital for the company and partial exit opportunities for the parent organization.

IPO Structure & Allocation

HDB Financial Services IPO price band is set at ₹700 to ₹740 per share, valuing the company at approximately $7.1 billion at the upper end of the band. At 740 rupees per share, the price-to-book ratio works out to 3.72 for HDB Financial Services, in line with peers such as Bajaj Finance and Shriram Finance.

The IPO’s anchor book opens on June 24, providing institutional investors early access to the offering. Talking about the grey market activity, the issue is commanding a GMP (Grey Market Premium) of ₹48-52 per share, suggesting a muted listing of 6-7% for investors over its upper price band.

JM Financial, BNP Paribas, BoFA Securities India, Goldman Sachs (India) Securities, HSBC Securities & Capital, IIFL Capital Services, Jefferies India, Morgan Stanley India Company, Motilal Oswal Investment Advisors, Nomura Financial Advisory and Securities (India), Nuvama Wealth Management, and UBS Securities India are the book running lead managers.

Proceeds from the fresh issue will bolster HDB Financial Services’ tier-I capital base for future needs, including onward lending and business expansion across its three core verticals. The official IPO documents provide comprehensive details about the offering structure and risk factors.

Company Profile & Business Overview

Founded in 2007, HDB Financial Services operates as a subsidiary of HDFC Bank, positioning itself as one of India’s leading diversified retail-focused non-banking financial companies. The company serves the growing needs of aspirational India through comprehensive financial solutions targeting both individual and business clients.

Business Model & Operations

HDB Financial Services Limited is a retail-focused, non-banking financial company classified as an upper-layer NBFC (NMFC-UL) by the Reserve Bank of India (RBI). The company operates a comprehensive business model combining lending services with business process outsourcing (BPO) capabilities.

The company’s omni-channel “phygital” distribution model combines a large branch network, in-house tele-calling teams, and various external distribution networks. With more than 70% of branches located in tier 4+ towns, HDB Financial Services demonstrates strong rural and semi-urban market penetration.

HDB Financial Services also offers business process outsourcing (BPO) services such as back-office support services, collection and sales support services to HDFC Bank, as well as fee-based products such as distribution of insurance products primarily to lending customers. This diversified revenue model provides stability and cross-selling opportunities.

The company maintains strategic partnerships with over 80 brands, original equipment manufacturers (OEMs), and more than 140,000 retailers and dealer touchpoints across India. This extensive distribution network enables comprehensive market coverage and customer acquisition capabilities.

Founded with the vision “To be India’s most admired NBFC through Great Execution, Driving Simplicity & Developing Humility,” HDB Financial Services focuses on delivering innovative products and services to cater to growing aspirational demands across diverse customer segments.

Financial Performance & Growth Metrics

HDB Financial Services has demonstrated consistent financial performance with steady revenue growth and strong market positioning. The company reported revenue of ₹16,300.28 crores in FY2025 against ₹14,171.12 crore in FY2024, representing a 15% year-over-year increase.

Financial Performance Summary

However, the company reported profit of ₹2,175.92 crores in FY2025 against profit of ₹2,460.84 crores in FY2024, indicating a 12% decline in profitability despite revenue growth. This performance reflects the challenging operating environment and increased provisioning requirements in the NBFC sector.

HDB Financial Services claims to have served 17.5 million customers as of September 30, 2024, with customer growth at a compound annual growth rate (CAGR) of 28.22% since FY22. The company focuses on underbanked and ‘new to credit’ segments, with customers classified as ‘new to credit’ accounting for 12.02% of the total gross loan book.

The company maintains strong capitalization with CRISIL and CARE credit ratings of AAA (Stable), the highest rating in the NBFC sector. This rating reflects robust financial strength, superior asset quality, and strong parentage from HDFC Bank.

Strong return metrics include Return on Average Equity of 16.39% as of September 30, 2024, demonstrating efficient capital utilization. The company maintains a debt-to-equity ratio of 5.93x, contributing to strong returns while maintaining prudent risk management practices.

Business Segments & Market Position

HDB Financial Services operates through three primary business verticals that provide comprehensive coverage across different customer segments and lending requirements. Each segment operates with independent management teams and dedicated operational frameworks.

Business Segment Breakdown

Enterprise Lending (39.85%): Provides secured and unsecured loans to micro, small, and medium enterprises (MSMEs) to help them grow their businesses and meet working capital needs. This segment serves the critical financing gap for small businesses across urban and rural markets.

Asset Finance (37.36%): Offering secured loans for income-generating assets like commercial vehicles, construction equipment, and tractors, mainly serving customers in the transportation and heavy machinery sectors. This segment benefits from India’s infrastructure development and logistics growth.

Consumer Finance (22.79%): Provides both secured and unsecured loans for consumer goods, digital products, vehicles, and personal expenses, meeting the lifestyle and financial needs of individual customers. This segment captures the growing aspirational consumption patterns in India.

The company claims to offer 13 distinct lending products across these three verticals, each with independent operations and dedicated management teams. Its loan portfolio is reportedly balanced, with no single product exceeding 25% of the total gross loan book, providing risk diversification.

HDB Financial Services maintains strong market positioning as one of the largest growing diversified retail-focused NBFCs in India. The company’s top 20 customers contribute less than 0.36% of total loans, reflecting a de-risked and low-concentration lending profile that reduces counterparty risk.

Competitive Advantages & Strengths

HDB Financial Services benefits from several competitive advantages that position it favorably within India’s competitive NBFC landscape. The company’s strategic parentage with HDFC Bank provides significant operational and brand advantages.

Key Competitive Strengths

Large, fast-growing customer base focused on underbanked customer segments: HDB Financial Services has built a substantial customer franchise of 17.5 million customers with strong growth momentum, particularly in underserved markets where traditional banking penetration remains limited.

Diverse loan portfolio with strong track record across cycles: The company’s balanced portfolio across three distinct verticals provides stability and risk mitigation, with demonstrated resilience across different economic cycles and market conditions.

Efficient digital onboarding and loan disbursement processes: Advanced technology infrastructure enables paperless onboarding journeys, AI/ML-driven credit scorecards, and API-integrated tools for employees and partners, improving operational efficiency and customer experience.

Data-driven cross-selling capabilities maximize customer lifetime value: The company leverages customer data and analytics to identify cross-selling opportunities across its product portfolio, enhancing revenue per customer and relationship depth.

Advanced technology for credit underwriting and collections management: Sophisticated risk assessment tools and collections systems help maintain asset quality while enabling efficient lending processes across diverse customer segments.

Highly experienced leadership team with deep industry expertise: The management team brings extensive experience in financial services, risk management, and NBFC operations, providing strategic guidance and operational excellence.

Access to one of the most cost-effective and diversified borrowing bases among Indian NBFCs, supported by strong credit ratings and HDFC Bank relationship, enables competitive funding costs and business sustainability.

Risks & Investment Considerations

Despite strong market positioning and growth prospects, HDB Financial Services faces several risks that potential investors should carefully consider before participating in the IPO. These risks reflect both company-specific factors and broader industry challenges.

Key Risk Factors

Macro-economic downturn in India could harm business and finances: Economic slowdowns directly impact borrower repayment capacity and new loan demand, potentially affecting both asset quality and business growth across all segments.

High reliance on unsecured loans lacking collateral: A significant portion of the loan portfolio consists of unsecured lending, which carries higher inherent risks during economic stress periods compared to secured lending with tangible collateral.

Decreased collateral value for secured loans may incur losses: Economic downturns can reduce collateral values for secured loans, potentially leading to losses if borrowers default and recovery values fall below outstanding loan amounts.

Dependence on the Promoter, potentially conflicting with shareholders’ interests: The close relationship with HDFC Bank, while providing advantages, also creates potential conflicts between parent company interests and independent shareholder value maximization.

Intense competition within India’s lending services industry: The NBFC sector faces increasing competition from traditional banks, fintech companies, and other financial institutions, potentially pressuring margins and market share.

Non-compliance with RBI regulations risks penalties and restrictions: The regulatory environment for NBFCs continues evolving, with potential for new compliance requirements that could impact operations and profitability.

The company operates in highly regulated sectors where changes in RBI policies, interest rate movements, and economic conditions can significantly impact performance and valuation.

Conclusion & Investment Verdict

HDB Financial Services represents a compelling investment opportunity in India’s growing NBFC sector, backed by strong fundamentals and strategic positioning. The company’s ₹12,500 crore IPO offers investors exposure to India’s financial inclusion story through a well-established platform with proven execution capabilities.

The combination of strong brand equity from HDFC Bank association, extensive distribution network, and focus on underbanked segments positions HDB Financial Services favorably for long-term growth. The company’s diversified business model across three distinct verticals provides stability and multiple growth avenues.

Investment Positives:

• Leading market position with 17.5 million customer base
• Strong distribution network with 1,772 branches nationwide
• AAA credit rating enabling cost-effective funding
• Experienced management team with proven track record
• Balanced portfolio across enterprise, asset, and consumer finance

However, investors should carefully consider the risks including economic sensitivity, regulatory changes, and competitive pressures in the NBFC sector. The recent decline in profitability despite revenue growth indicates margin pressures that require monitoring.

At the ₹700-740 price band, HDB Financial Services IPO appears reasonably valued compared to listed peers, with P/B ratio of 3.72x in line with sector standards. The grey market premium of ₹48-52 suggests moderate listing gains, making it suitable for long-term investors rather than short-term traders.

For investors seeking exposure to India’s financial services growth story, HDB Financial Services offers a balanced risk-reward proposition backed by strong fundamentals and market positioning. The IPO merits consideration for portfolio diversification, particularly for those bullish on India’s economic growth and financial inclusion trends.

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