HDB Financial Services vs L&T Finance and M&M Finance: Here’s how three NBFCs stack up against each other

HDB Financial Services opened for subscription on Wednesday and received a strong response, with the overall IPO getting 40% subscribed. As of 11:00 am on Thursday, the NII and employees portion of the IPO is over-subscribed, while retail, which holds over 40% of the total shares issued, is subscribed by 43% as of 11:00 am.

HDB Financial Services IPO is the most-tracked IPO among the five other issues opened this week. The IPO is the largest in 2025 and is significant being a HDFC Bank subsidiary. The company is competitively placed in the industry with one of the fastest-growing franchises in the segment.

The company was seventh seventh-largest leading, diversified retail-focused non-banking financial company as of 31st March 2024. It lends into three business verticals, including Enterprise lending, Asset Finance and Consumer Finance. It is also the second largest and the third fastest growing customer franchise amongst the NBFC peers. According to the CRISIL report, they have served 19.2 million customers as of FY25, which grew at a compounded rate of 25.4% from FY23 to FY25.

Gross loan book

HDB Financial Services holds a gross loanbook of ₹1,06,880 crore as of FY25 and grew at a CAGR of 20.34% from FY22-FY25. Similarly, L&T Finance holds the gross loan book of ₹97,700 crore as of FY25 and grew at a CAGR of 6.12% in the same period. Meanwhile, M&M Finance held the highest gross loan book amongst the three at ₹1,19,600 crore as of FY25, which grew at a CAGR of 22.5% from FY22 to FY25. The growth of HDB Financial Services remains strong among other peers as well.

Loan book composition

The quality of the loan book remains a crucial aspect in the lending business as it determines the efficiency of the process and aids better operational margins. As of FY25, HDB Financial Services’ loan book holds the majority of secured loans at 73% and 27% in unsecured loans, which improved from 71.3% and 28.6% in FY24. Similarly, L&T Finance holds 55.4% in the secured category and 44.6% in the unsecured category. Meanwhile, the M&M Finance holds a superior position in terms of loanbook composition, with 94.8% secured lending and 5.15% in the unsecured category.

Profitability metrics

In terms of profitability, L&T Finance hold a higher position in comparison with HDB Financial and M&M Finance. L&T Finance yield on gross advances stood at 16% for FY25 vs 15.5% in FY24, while HDB Finance held a 14.04% yield on advances vs 13.92% in FY24. Lastly, the M&M Finance held a 13.8% yield on advances vs 14.15% in FY24. L&T Finance enjoyed a higher yield primarily because of its high unsecured lending portfolio, which commands higher interest rates as compared to the secured category. Bajaj Finance holds the highest yield in the category at 18.8% on net advances.

Source: HDB Financial Services RHP

Asset quality

In terms of asset quality, HDB Financial Services held the superior position with robust asset quality among the three players. HDB Financial Services GNPA & NNPA for FY25 stood at 2.26% and 0.99%, slightly higher than 1.9% and 0.63% in FY24. Followed by HDB Financial, L&T Finance reported 3.29% GNPA and 0.9% NNPA for FY25. While M&M Finance held the highest GNPA and NNPA among the three players at 3.6% and 1.8% as of FY25. In comparison, HDB Financial Services held the robust asset quality amongst all.