The Indian primary market is buzzing with the highly anticipated Initial Public Offering (IPO) of HDB Financial Services Limited (HDBFS), a prominent Non-Banking Financial Company (NBFC) backed by banking giant HDFC Bank. Opening on June 25, 2025, and set to close on June 27, this ₹12,500 crore issue is poised to be one of the largest NBFC public offerings of the year.
As investors weigh their options, the insights of market experts like Zee Business Managing Editor Anil Singhvi become crucial. Here’s a breakdown of what HDB Financial Services brings to the table and Singhvi’s recommendation.
The IPO at a Glance
HDB Financial Services’ IPO is a book-building issue with a price band set between ₹700 and ₹740 per equity share. The total issue size of ₹12,500 crore comprises a fresh issue of ₹2,500 crore aimed at augmenting the company’s Tier-I capital to support future lending and expansion, and an Offer For Sale (OFS) of ₹10,000 crore by its parent company, HDFC Bank. The shares are expected to list on BSE and NSE on July 2, 2025.
HDB Financial Services: A Deep Dive into its Business Model
HDB Financial Services is a diversified retail-focused NBFC that has carved a significant niche in India’s financial landscape. It stands as one of the largest NBFCs in terms of its gross loan book, holding over 19.2 million customers across 1,771 branches in 1,170 towns and cities as of March 31, 2025. This extensive network, with 70% of its branches in Tier 4 and beyond towns, underscores its focus on underserved and underbanked customers.
The company’s lending portfolio is broadly diversified across three key verticals:
- Enterprise Lending: Providing secured and unsecured loans primarily to Micro, Small, and Medium Enterprises (MSMEs). This segment contributes approximately 39% of its AUM (Assets Under Management).
- Asset Finance: Offering secured loans for the purchase of new and used commercial vehicles, construction equipment, and tractors (around 38% of the AUM).
- Consumer Finance: Including secured and unsecured loans for personal expenses, consumer goods, and two-wheelers (approximately 23% of the AUM), which is also its fastest-growing segment at 26% YoY in FY25.
Beyond lending, HDB Financial Services also provides crucial business process outsourcing (BPO) services to HDFC Bank, handling collections, back-office operations, and sales support. This synergistic relationship with its parent company is a significant competitive advantage.
Financial Performance and Strengths:
HDB Financial Services has demonstrated consistent revenue growth. Its revenue from operations increased by a healthy 15% to ₹16,300.28 crore in FY25 (from ₹14,171.12 crore in FY24). While its Profit After Tax (PAT) saw an 11.57% decline to ₹2,175.92 crore in FY25 (compared to ₹2,460.84 crore in FY24), this was primarily due to increased credit costs (provisions doubled to ₹2,113 crore in FY25) and a slight moderation in Net Interest Margin (NIM) to 7.56% (from 7.85% in FY24) driven by rising borrowing costs.
The company maintains robust credit underwriting and strong asset quality, with a Gross Non-Performing Asset (GNPA) ratio of 2.26% in FY25 (compared to 1.90% in FY24, but an improvement from 2.73% in FY23). Its Net NPA stood at 0.99% in FY25. Approximately 73% of its loan book is secured, providing a good buffer against credit losses.
Key strengths that underpin HDBFS’s position include:
- Strong Parentage: Being a 94.04% subsidiary of HDFC Bank provides HDBFS with unparalleled brand trust, operational synergies, and strong capital access. HDFC Bank will continue to hold a majority stake (around 74%) post-IPO. This also grants it a robust liability franchise and low borrowing costs, achieving AAA (Stable) ratings from CRISIL and CARE.
- Diversified Product Portfolio: Its wide range of lending products across various segments allows for balanced growth and resilience against sectoral fluctuations. No single product accounts for over 25% of its loan book, and the top 20 customers contribute less than 0.34% of total loans, indicating a highly granular and low-risk portfolio.
- Robust Customer Base & Omni-channel Reach: With a significant and growing customer base and an extensive “phygital” (physical + digital) distribution setup, HDBFS has demonstrated its ability to reach and serve a broad spectrum of borrowers, particularly in semi-urban and rural areas, catering to the “new to credit” customer segment.
- Stable Asset Quality & Risk Management: Despite the challenging economic environment, HDBFS has largely maintained a healthy asset quality. Its strong underwriting, coupled with features like PhonePe’s Guardian fraud detection platform (though not directly linked to HDBFS in terms of product, shows group emphasis on tech-enabled risk management), contributes to resilient financials.
- Digital Capabilities: The company leverages technology for digital onboarding, credit scoring, automated decision-making, and collections, enhancing efficiency and customer experience.
Competitive Landscape and Financial Ratios
HDB Financial Services operates in a highly competitive NBFC landscape, competing with established players like Bajaj Finance, Shriram Finance, Cholamandalam Investment, and even fintech start-ups. While HDBFS’s Return on Equity (ROE) of 14.7% in FY25 trails some peers like Bajaj Finance (19.2%) and Cholamandalam (19.8%), its valuation at 3.7 times its projected FY25 post-issue book value is considered reasonable by many analysts, especially given its strong brand and consistent performance. Its Cost-to-Income ratio of 43% in FY25 indicates good operational efficiency.
Anchor Investor Details
Ahead of its public opening, HDB Financial Services successfully raised ₹3,369 crore from a diverse group of anchor investors by allotting 4.55 crore shares at ₹740 apiece (the upper end of the price band). Prominent institutional participants included Life Insurance Corporation of India (LIC), BlackRock, Goldman Sachs Funds, ICICI Prudential Mutual Fund, UTI Mutual Fund, SBI Mutual Fund, Nippon India, Kotak Mutual Fund, Axis Mutual Fund, Fidelity Investments, Abu Dhabi Investment Authority, and HSBC. This strong participation from marquee investors signals confidence in the company’s prospects.
Anil Singhvi’s Recommendation: To Subscribe or Not?
Zee Business Managing Editor Anil Singhvi has provided his clear recommendation for the HDB Financial Services IPO.
Anil Singhvi suggests that investors can “Subscribe” to the HDB Financial Services IPO for both reasonable listing gains and a long-term investment perspective.
He reiterates his positive stance based on:
- Strong Parentage of HDFC Brand: The backing of HDFC Bank, India’s largest private sector bank, provides immense credibility and a strong foundation.
- Diversified Product Portfolio and Granularity: The balanced loan book reduces concentration risk and offers stable growth avenues.
- Robust Growth in Customer Base: HDBFS’s ability to penetrate semi-urban and rural markets positions it well for future growth in India’s underpenetrated credit market.
- Stable Asset Quality: Despite a slight uptick in GNPA in FY25, the overall asset quality remains healthy for an NBFC of its scale.
- Reasonable Valuations: Singhvi finds the IPO to be reasonably valued, especially when considering the “HDFC premium” and its overall operational strength.
Current IPO Subscription Status (as of June 26, 2025, 11:20 AM IST)
The IPO has received a tepid investor response on Day 2 so far. As per BSE data, the issue has been subscribed approximately 53% overall.
- Non-Institutional Investors (NIIs): Over 1.14 times subscribed.
- Retail Individual Investors (RIIs): About 0.42 times subscribed.
- Qualified Institutional Buyers (QIBs): Only 0.01 times subscribed (muted response so far, but typically picks up on the last day).
- Employee Quota: Strong response at around 2.19 times subscribed.
- Shareholders Quota: About 91% subscribed.
Grey Market Premium (GMP) Insights
The Grey Market Premium (GMP) for HDB Financial Services IPO has seen a slight dip from Day 1. As of June 26, 2025, the GMP is hovering around ₹50-₹55, indicating a potential listing price of approximately ₹790-₹795 per share. This translates to a potential listing gain of about 6.8% to 7.4% over the upper price band of ₹740. It’s crucial to remember that GMP is an unofficial indicator and can change rapidly based on market sentiment and subscription trends.
Key Risks to Consider:
While the prospects are strong, potential investors should be aware of certain risks:
- Asset Quality Volatility: Despite strong underwriting, any significant economic downturn or sector-specific challenges could impact asset quality, particularly in the unsecured lending portfolio (26.99% of its total gross loans as of March 31, 2025).
- Regulatory Changes: The RBI’s draft circular on ‘Forms of Business’ (October 2024), if implemented in its current form, could potentially require HDB Financial Services to reduce promoter shareholding below 20% or even alter its business lines if there is an overlap with HDFC Bank’s activities. This introduces an element of regulatory uncertainty.
- Competition: The Indian lending market is intensely competitive, with new fintechs and established players vying for market share. HDBFS’s ability to maintain its growth trajectory amidst this competition is key.
- Interest Rate Fluctuations: As an NBFC, HDBFS is susceptible to changes in interest rates, which can impact its cost of borrowing and net interest margins.
- Valuation Comparison: While deemed reasonable by some, its post-issue valuation (3.7x FY25 P/B) is higher than some peers, requiring HDBFS to deliver consistent high growth to justify it.
How to Apply for the HDB Financial Services IPO
Applying for the IPO is a seamless process for demat account holders:
- Via ASBA (Applications Supported by Blocked Amount): The most common method. You can apply through your bank’s net banking portal (under the “IPO” or “Invest” section) or by visiting a branch. Your application amount will be blocked in your account until allotment.
- Through Broker’s Platform: Many stockbrokers offer online IPO application facilities directly through their trading platforms or apps.
Ensure you have a valid Demat account and sufficient funds in your bank account before applying.
Conclusion
The HDB Financial Services IPO presents a compelling opportunity, particularly given its strong parentage, diversified business model, extensive customer reach, and focus on growth in underserved segments. While the slight dip in PAT in FY25 due to higher credit costs and regulatory uncertainty are points to note, the company’s overall robust financial health, strategic positioning, and the endorsement from experts like Anil Singhvi make it an attractive proposition.
For investors seeking reasonable listing gains and considering a long-term holding in a fundamentally strong NBFC with the backing of a blue-chip parent, HDB Financial Services appears to be a noteworthy issue to consider. As always, it’s advisable to conduct your own due diligence and consult with a financial advisor before making any investment decisions. The next two days will be crucial to see how the Qualified Institutional Buyers (QIB) portion responds.
