HDB Financial Services IPO

Incorporated in 2007 as a subsidiary of HDFC Bank Limited, HDB Financial Services is the 7th largest, diversified, retail-focused non-banking financial company (NBFC) in India with a total gross loan book of ₹90,220 crore as of March 31, 2024, among its peers. The company is categorised as an upper-layer NBFC (NBFC-UL) by the RBI.

The company primarily caters to underserved and underbanked customers in low to middle-income households with minimal or no credit history. More than 80% of HDB Financial Services branches are located outside India's 20 largest cities, and over 70% in tier 4+ towns. It operates through an omnichannel "phygital" distribution model with a pan-India network of 1,771 branches across 1,170 towns and cities in 31 states and UTs as of March 31, 2025.

The company operates through three diversified business verticals: Enterprise lending, representing 39.30% of total gross loans, providing secured and unsecured loans to MSMEs. Asset finance accounts for 38.03% of total gross loans, offering secured loans for the purchase of commercial vehicles, construction equipment, and tractors. Consumer finance accounts for 22.66%, offering loans for consumer durables, two-wheelers, automobiles, and personal loans.

Secured loans represent 73.01%, while unsecured loans account for 26.99% of total gross loans as of March 31, 2025. As of March 31, 2025, its total gross loan portfolio stood at ₹1.06 lakh crore, a rise of 18.8% YoY.

Its customers mainly comprise salaried and self-employed individuals, as well as business owners and entrepreneurs. The company served 1.92 crore customers as of March 31, 2025, growing at a CAGR of 25.45% in the last two fiscal years, while the average ticket size of loans stood at approximately ₹165,000 as of March 31, 2025.

The company maintains strong asset quality with GNPA and NNPA ratios of 2.26% and 0.99%, respectively, as of March 31, 2025, and a credit cost ratio of 2.14% for FY25. The company has highly conservative policies for provisioning, with a provisioning coverage ratio (PCR) at 55.95% and 3.31% provisioning of total gross loans as of March 31, 2025.

India has low credit penetration compared to other developing countries, with retail credit hovering around 25% of GDP as of FY25. Systemic credit is projected to grow at a robust CAGR of 13–15% between FY25–FY28, reaching ₹297 trillion. Within this, NBFC credit is expected to expand at 15–17% CAGR, gaining share from 21% in FY25 to 22% by FY28, supported by rising retail demand. The retail segment alone is projected to grow at a 14–16% CAGR, driven by small-ticket loans across housing, vehicles, personal finance, and MSMEs.

HDB Financial Services digital-first strategy with 95% digital customer onboarding and collections aligns seamlessly with India's digital revolution, where digital payment transactions grew at 50% CAGR to reach 22,200 crore in FY25, while its proven ability to navigate multiple credit cycles positions it ideally to capture the expanding Middle India segment (projected to grow from 10.3 crore to 18.1 crore households by FY30) and the massive under-penetrated rural credit market, where only 9% of banking credit reaches despite contributing 47% to GDP.

Government initiatives like PMJDY have resulted in 54.12 crore accounts being opened as of December 2024, with 67% in rural and semi-urban areas. However, only 27% of the Indian population is financially literate, and only 12% borrowed money from formal sources, indicating significant growth potential.

Now, HDB Financial Services Limited is launching its initial public offering (IPO), which consists of a fresh issue of equity shares worth up to ₹2,500 crore and an offer for sale worth up to ₹10,000 crore. The total issue size of the IPO is ₹12,500 crore. Its shares will be listed on the NSE and BSE.