HDB Financial Services IPO: From business to key risks- check out 10 key things to know from RHP before investing

HDB Financial IPO: The ₹12,500 crore initial public offering (IPO) of HDB Financial Services opens for subscription on Wednesday, June 25 and will remain open until Friday, June 27. The mainboard IPO combines a fresh issue of ₹2,500 crore and an offer for sale of ₹10,000 crore from HDFC Bank. The HDB Financial Services IPO price band has been fixed in the range of ₹700 to ₹740 per equity share of the face value of ₹10.

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

MUFG Intime India Private Limited is the registrar of the issue.

Let's take a look at 10 key things from the Red Herring Prospectus (RHP) of HDB Financial that investors might want to know before subscribing to the issue.

1. HDB Financial IPO - Promoters

HDFC Bank is the promoter of HDB Financial. HDFC Bank holds 750,596,670 equity shares of the company of face value of ₹10, equivalent to 94.04 per cent of the pre-offer issued.

2. HDB Financial IPO - Major peers

Aditya Birla Finance, Bajaj Finance, Cholamandalam Investment and Finance Company, HDB Financial Services, L&T Finance, Mahindra & Mahindra Finance, Shriram Finance, Sundaram Finance and Tata Capital are some of the major peers of the company.

3. HDB Financial IPO- Business

According to the RHP, highlighting a CRISIL report, HDB Financial is the seventh-largest, diversified retail-focused non-banking financial company (NBFC) in India in terms of the size of total gross loan book, at ₹902.2 billion as at March 31, 2024, amongst its NBFC peers.

HDB Financial offers a large portfolio of lending products to a diverse customer base through a wide omnichannel distribution network.

"Our lending products are offered through our three business verticals: Enterprise Lending, Asset Finance and Consumer Finance. We believe that the success of our business model and operating philosophy is evidenced by our strong and sustained growth and profitability metrics," says the company's RHP.

4. HDB Financial IPO- Financial performance

The company's total assets, at the end of FY25, stood at ₹1,08,663.29 crore.

Its profit after tax (PAT) for FY23 stood at ₹1,959.35 crore, which rose to ₹2,460.84 crore in FY24. In FY25, the company's PAT stood at ₹2,175.92 crore.

Total revenue from operations in FY23 was ₹12,402.88 crore, which rose to ₹14,171.12 crore and ₹16,300.28 crore in FY24 and FY25, respectively.

As of FY25, HDB Financial has the fourth-lowest GNPA ratio of 2.26 per cent and the fifth-lowest NNPA ratio of 0.99 per cent, amongst its NBFC peers as of March 31, 2025, according to the RHP.

5. HDB Financial IPO- Profitability parameters

As of FY25, HDB’s average cost of borrowing stood at 7.90 per cent, which is the sixth lowest amongst peers. Also, HDB Financial has the fifth-highest return on equity at 14.72 per cent amongst its NBFC peers as of FY25.

As of FY25, HDB Financial has third highest leverage levels (5.9 times) and third highest provision coverage ratios (55.95 per cent) amongst its NBFC peers as of FY25.

6. HDB Financial IPO- Distribution footprint of peers

According to the RHP, as of FY25, HDB Financial has the highest number of employees (89,943) followed by Shriram Finance which had total of 79,872 employees. Also, HDB Financial has the second largest and the third fastest growing customer franchises amongst its NBFC peers (for which data is available) based on the number of customers at 19.2 million as on Fiscal 2025, which has grown at a CAGR of 26.88 per cent between FY22 and FY25.

7. HDB Financial IPO- Under-penetration of the Indian banking sector provides opportunities for growth

According to the company's RHP, under-penetration of the Indian banking sector provides opportunities for growth.

"The Indian banking sector is significantly under-penetrated, as observed in the current bank credit-to-GDP ratio of 56 per cent for India as of the fourth quarter of CY23. The number of commercial bank branches as well as ATMs in India per 100,00 people contrasts with other countries. This provides immense opportunities for banks and other financial institutions over the long term," the company's RHP says.

8. NBFC credit to grow faster than systemic credit

The credit growth of NBFCs is expected to continue to rise at a faster pace.

According to the company's RHP, during FY19 to FY 25, NBFC credit is estimated to have witnessed a growth at CAGR of 13.2 per cent. NBFCs' AUM as of FY19 was approximately ₹23 lakh crore, which grew at a six-year CAGR of 13.2 per cent to ₹ 48 trillion as of FY25.

"Rapid revival in the economy is expected to drive consumer demand in FY26, leading to healthy growth in NBFCs," says the company's RHP.

9. Unsecured loans are key risks

As of March 31, 2025, unsecured loans comprised 26.99 per cent of the company's total gross loans, which is a decrease from 28.66 per cent as of March 31, 2024.

"Our unsecured loan portfolio is not supported by any collateral that could help ensure repayment of the loan, and in the event of non-payment by a borrower of one of these loans, we may be unable to collect the unpaid balance," says the company.

10. High competition a key challenge

The RHP highlights that the lending services industry in India is highly competitive, including competition from established banks and NBFCs having large networks of branches or ATMs with advanced technologies and cross-selling capabilities, fintech start-ups and private unorganised and informal financiers in rural areas.

The company says its inability to compete effectively could adversely affect its business, results of operations, cash flows and financial condition.

"Our market share, on the basis of our AUM (assets under management), for FY25 is approximately 2.22 per cent, according to the CRISIL Report," says the company's RHP.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.