Recommendation: Subscribe – Long term
HDB Financial Services Ltd, a subsidiary of HDFC Bank, is a leading NBFC catering to underserved and underbanked customers, primarily from low-to-mid income households. As of FY25, it manages a diversified ₹1.07 lakh crore loan book across enterprise lending, asset finance, and consumer finance, with 73% of the portfolio secured. The company has built a strong nationwide presence with 1,771 branches, over 80% of which are located beyond India’s top 20 cities. Its granular lending model serves nearly 1.9 crore customers through a blend of physical and digital channels. Backed by AAA-rated credit and HDFC’s strong parentage, HDB is positioned for sustained growth in the retail lending space.
India’s retail credit market presents a significant growth opportunity for players like HDB Financial Services, driven by rising formalisation, growing aspirations of low-to-mid income households, and increasing financial penetration in Tier 3 and smaller towns. With over 900 million adults and only around 400 million active credit users, the underpenetration of credit remains stark—especially in semi-urban and rural areas. NBFCs are expected to outpace bank credit growth, with CRISIL projecting 15–17% CAGR for NBFC credit between FY25–28, compared to 1315% for the overall system. HDB, with its strong distribution footprint and focus on underserved segments, is strategically placed to tap into this large, underbanked customer base. Its granular, secured lending model is well-aligned with India’s expanding consumption and MSME credit demand.
Company operates on a solid platform backed by the trust and stability of HDFC Bank. Its balanced presence across enterprise, asset, and consumer finance segments helps mitigate concentration risks while addressing diverse credit needs. With a widespread branch network focused on underserved markets, the company is well-positioned to tap into underpenetrated regions. Its granular lending approach and prudent underwriting practices support asset quality, while a strong credit rating profile ensures access to cost-effective funding. This foundation equips HDB to scale efficiently in India’s growing retail lending landscape.
Company plans to scale its business through a sharper focus on Tier 3 and rural markets, backed by an integrated physical and digital approach. The company aims to expand its loan book through deeper customer engagement, greater use of analytics in credit underwriting, and enhancing productivity per branch. It also seeks to improve profitability by tightening cost structures, driving automation in collections, and selectively growing higher-yielding segments. This strategic focus is designed to ensure disciplined, profitable expansion while safeguarding asset quality.
Over FY23–FY25, HDB Financial’s loan book grew at a CAGR of 23.5%, rising from ₹70,030 crore to ₹1,06,877 crore, while net interest income grew at a 17.2% CAGR from ₹5,415.6 crore to ₹7,446 crore. Profit after tax rose from ₹1,959 crore in FY23 to ₹2,461 crore in FY24, before easing to ₹2,176 crore in FY25 due to higher provisioning. Asset quality improved in FY24 but saw some pressure in FY25, with gross Stage 3 assets rising to 2.26%. Despite elevated credit costs, margins remained stable, supporting overall growth momentum.
At the upper price band of ₹740, HDB Financial is valued at 3.4x FY25 book value, which is reasonable compared to peers like Bajaj Finance and Chola, given its scalable model and strong parentage. While near-term return ratios are moderate, the company’s structural growth potential and improving profitability support long-term value creation. We recommend a Subscribe rating for long-term investors.
Company operates in a segment exposed to borrowers with limited credit history, making it vulnerable to higher delinquencies during economic slowdowns. Elevated credit costs and slippages, particularly in the unsecured portfolio, remain key concerns. Additionally, rising competition from fintechs and banks in retail lending, along with regulatory changes for upper-layer NBFCs, could impact growth and margins. Managing asset quality and maintaining underwriting discipline will be critical going forward.
| Details | Information |
|---|---|
| Issue Open | June 25, 2025 |
| Issue Close | June 27, 2025 |
| Issue Price | ₹700 – ₹740 per share |
| Market Cap. | ₹57,942 Cr – ₹61,253 Cr |
| Total Issue Size | ₹12,500 Cr |
| Fresh Issue | ₹2,500 Cr |
| Offer for Sale | ₹10,000 Cr |
| Face Value | ₹10 per share |
| Market Lot | 20 Equity Shares |
| Issue Type | Book Built Issue |
| Category | Allocation (%) |
|---|---|
| QIB | 44.92% |
| Retail | 13.48% |
| Non-Institutional | 31.44% |
| Shareholders | 10% |
| Employee Quota | 0.16% |
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