June 27, 2025
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HDB Financial Services IPO Review by Paresh Gordhandas, CA & Research Analyst at
ChanakyaNiPothi.com, A legacy of 31 Years. India`s The Oldest Investment & IPO website.
Investment Rationale: HDB Financial Services IPO
HDB Financial Services is the seventh-largest diversified, retail-focused non-banking financial company (NBFC) in India, based on its Total Gross Loan Book of Rs.902.2 billion as of March 31, 2024. By March 31, 2025, this figure had grown to Rs.1,068.8 billion, registering a robust CAGR of 23.54% between FY23 and FY25.
The company’s Assets Under Management (AUM) stood at Rs.1,072.6 billion as of March 31, 2025, growing at a CAGR of 23.71% during the same period. In FY25, HDB reported a Profit After Tax (PAT) of Rs.21.8 billion, reflecting a CAGR of 5.38% over two years.
Strong Financial Metrics
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Return on Assets (RoA): 2.16%
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Return on Average Equity (RoE): 14.72%
These returns are ranked 7th and 5th, respectively, among peer NBFCs, showcasing efficient operations and prudent financial management.
Expansive and Inclusive Customer Franchise
According to the CRISIL Report, HDB Financial holds the position of the second-largest and third-fastest growing customer franchise among NBFCs with available data. It served 19.2 million customers as of March 31, 2025, growing at an impressive CAGR of 25.45% between March 2023 and March 2025.
HDB’s extensive physical presence supports its growth:
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1,771 branches across 1,170 towns and cities in 31 states and union territories.
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Over 80% of branches are located outside India’s 20 largest cities, with more than 70% in Tier 4+ towns.
Omnichannel “Phygital” Distribution Model
HDB effectively integrates physical branches, in-house tele-calling units, and a vast external partner network:
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Ties with 80+ brands and OEMs.
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Access to 140,000+ retail and dealer touchpoints.
Robust Asset Quality & Risk Management
HDB maintains disciplined asset quality:
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Gross NPA (GNPA): 2.26%
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Net NPA (NNPA): 0.99%
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Credit Cost Ratio: 2.14%
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Provisioning Coverage Ratio: 55.95% (3rd highest among peers)
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Provisions: 3.31% of Gross Loans
Its conservative approach to provisioning and a strong Asset-Liability Management (ALM) framework helps safeguard against liquidity and interest rate risks.
IPO Valuation and Growth Potential
In FY25, the company earned an EPS of Rs.27.40. At the IPO’s upper price band of Rs.740, this implies a P/E ratio of 27.00x. With a current grey market premium (GMP) of Rs.74, listing at Rs.814 (P/E of 29.70x) seems plausible.
By comparison, Bajaj Finance trades at a P/E of 34.30x. Applying this valuation to HDB suggests a potential post-listing price of Rs.940.
Additionally, we anticipate a strong quarterly performance for Q1 FY26, (Annualised Projected EPS of Rs. 41 for 2025-26) which could further drive momentum post-listing.
Investment Recommendation
Despite a current GMP of just Rs.74, we strongly recommend applying for the IPO for both listing gains and as a medium to long-term investment. With strong fundamentals, rapid growth, and a wide distribution network, HDB Financial offers a compelling investment opportunity in India’s fast-growing NBFC sector.
Conclusion: Must Apply for the IPO
Review by Paresh Gordhandas CA and Research Analyst, INH00000750
+ from fundamental angle: Must Apply
+ from grey market angle: Apply
