Japan’s MUFG in talks to invest $2 bn in HDB Financial Services, HDFC Bank’s NBFC arm

Japan’s MUFG in talks to invest $2 bn in HDFC Bank’s NBFC arm HDB Financial Services

Japan’s Mitsubishi UFJ Financial Group Inc (MUFG) is in advanced talks to invest up to $2 billion in non-bank lender HDB Financial Services Ltd, a subsidiary of India’s largest private sector lender HDFC Bank Ltd, sources aware of the development told Moneycontrol.

The proposed investment by MUFG is likely to value the non-bank lender at close to $10 billion, sources said. HDFC Bank holds a 95 percent stake in the NBFC arm.

The investment talks with MUFG come ahead of the lender’s proposed initial public offering (IPO).

In January, HDFC Bank Chief Financial Officer Srinivasan Vaidyanathan said that the IPO process of HDB Financial Services may commence in the next few months.

Economic Times first reported about the talks between MUFG and HDFC Bank on Friday.

MUFG’s interest in picking up a substantial stake in HDB Financial Services highlights the Japanese financial institution’s interest in growing its presence in India.

Last year, MUFG invested Rs1 ,910 crore in DMI Finance Pvt Ltd, a fintech company providing digital financial services.

Emails sent to HDFC Bank and MUFG did not elicit a response till press time.

HDB Financial Services has a diversified product base with commercial vehicle/construction equipment financing, comprising 44 percent of the lender’s assets under management (AUM), as on December 31, 2023, loan against property comprising 24 percent, and business loans accounting for 24 percent, according to a March 7 report by credit rating agency Crisil.

The lender’s AUM grew to Rs 83,989 crore, as on December 31, 2023, from Rs 70,084 crore, as on March 31, 2023.

The NBFC has also expanded into consumer durable financing, gold loans, digital products loans and other related segments and its share has increased to 8 percent of the AUM, as on December 31, 2023, from 3 percent, as on March 31, 2019, Crisil said.

“HDB’s overall credit profile remains supported by healthy capitalisation with a net worth of Rs 11,952 crore and gearing stood at 5.59 times as on December 31, 2023,” the report said.

Also Read: How much value can HDB Financial Services' IPO create for HDFC Bank?

HDB Financial Services’ gross stage III assets reduced to 2.25 percent, as on December 31, 2023, from 2.73 percent, as on March 31, 2023, led by write-offs and lower slippages.

The NBFC reported a profit of Rs 1,959 crore for fiscal 2023, against a profit of Rs 1,011 crore for fiscal 2022.

It reported a profit of Rs 1,805 crore for the nine months that ended in fiscal 2024, as per the Crisil report.