Company Overview:
HDB Financial Services Ltd (HDBFS) is categorized as an upper-layer NBFC by the Reserve Bank of India. It is the 4th largest diversified retail-focused NBFC (by Gross Loan Book size) as of Mar’25. It is a subsidiary of HDFC Bank, which is the largest private sector bank in India in terms of total assets as of Mar’25. The company’s Assets Under Management (AUM) stood at Rs 1,073 bn as of Mar’25. HDBFS offers a diversified portfolio of products through its 3 business verticals. As of FY25, the share of Enterprise Lending stood at 39.3%, the share of Asset Finance stood at 38.0% and the share of Consumer Finance stood at 22.7% of the gross loan book. The company operates through an omni-channel “phygital” distribution model that combines a large network of branches, in-house tele-calling teams and various external distribution and channel partners. As of Mar’25, it has a strong pan-India presence with a wide network of 1,771 branches across 31 States & UTs.
Key Highlights:
1. Healthy growth in the retail loan book and rapidly growing customer base: The company is the second largest and fastest growing customer franchise NBFC, serving 1.9 cr customers as of Mar’25. The company focuses on underserved & underbanked customers in low to middle income households with minimal to no credit history. The gross loan book stood at Rs 1,068 bn as of Mar’25, registering a 2-year CAGR of 23.54%. Majority of the book is secured in nature. The share of secured loans stood at 73.01% while unsecured loans stood at 26.99% of gross loans as at Mar’25.
2. Strong systems & processes leading to robust credit underwriting & collections: HDBFS has instituted a comprehensive underwriting and collection process. It has built an in-house, experienced and dedicated underwriting team of 4,500 employees and an overall collection team of 12,500 employees. The company’s focus on prudent credit underwriting and collection has led to strong asset quality. The GNPA of the company stood at 2.3% and NNPA stood at 1.0%, which stood at the 4th and 5th lowest, respectively among NBFC peers in Mar’25.
3. Access to low-cost & diversified borrowing sources: HDBFS’s average cost of borrowing stood at 7.9% as of Mar’25, the 6th lowest among NBFC peers. It was mainly driven by its diversified liability franchise and strong credit rating of AAA stable by Crisil & Care Ratings. The company maintains a prudent and sustainable level of leverage at 5.85x as of Mar 25, while ensuring adequate capitalization (CRAR standing at 19.22% as of Mar 25).
4. Strong parentage of HDFC Bank: The company is a subsidiary of HDFC Bank, India’s largest private sector bank by total assets as of Mar’25. Although HDBFC operates as an independent company it can leverage HDFC Bank’s strong brand value to build a large customer franchise, a strong credit rating and low cost of borrowings.
Valuation: The company is valued at an FY25 P/B of 3.2x/3.4x at postissue capital at the lower price band & upper price band respectively. The company is backed by strong parentage, brand, governance, risk management and a high credit rating. It is one of the largest NBFCs catering to the 2 nd largest customer franchise. The company is well placed to register healthy growth going ahead, while witnessing an improvement in the asset quality. We recommend investors SUBSCRIBE to the issue at the cut-off price.
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