HDB Financial Services IPO valuation trails Bajaj Finance, Chola despite steady fundamentals

HDB Financial Services IPO valuation trails Bajaj Finance, Chola despite steady fundamentals

Despite a 14 percent gain post-listing, HDB Financial Services continues to trade at a relatively reasonable valuation compared to its peers, given its growth trajectory and return profile.

At the listing price of Rs 846 per share, the company is valued at a FY25 post-issue price-to-book ratio of 3.21x. Analysts consider this valuation fair in the context of HDB's performance metrics, even though it trails key peers like Bajaj Finance and Cholamandalam Investment and Finance in terms of return on equity (RoE). For FY25, HDB reported an RoE of 14.7 percent, notably lower than Bajaj Finance’s 19.4 percent and Chola’s 19.7 percent.

With an asset under management (AUM) base of Rs 1.07 lakh crore as of March 2025, HDB positions itself as a mid-sized player within the NBFC sector. Although it lags Bajaj Finance and Shriram Finance in absolute size, it has recorded a healthy AUM CAGR of 23.7 percent. However, this remains below the growth momentum seen in Bajaj Finance (29.9 percent) and Chola Finance (31.6 percent).

On profitability parameters, HDB's net interest margin (NIM) stands at 7.6 percent, placing it ahead of Sundaram Finance (5.2 percent) and Chola (6.6 percent), but behind Mahindra Finance (7.3 percent), Shriram Finance (9 percent), and notably Bajaj Finance at 12 percent. Its return on assets (RoA) of 2.2 percent also reflects a mid-tier position—lower than Sundaram Finance (2.8 percent), Chola (2.4 percent), and significantly below Bajaj Finance’s 5 percent, but ahead of Mahindra Finance (1.9 percent).

In terms of asset quality, HDB maintains a net NPA ratio of 0.6 percent, comparable to Sundaram Finance and better than Mahindra Finance (1.3 percent), Shriram Finance (1.6 percent), and Chola (1 percent), though Bajaj Finance remains the leader with a net NPA of just 0.3 percent.

Analysts at Mirae Asset Sharekhan highlight that HDB’s strong parentage and relatively smaller size versus Bajaj Finance provide significant headroom for growth. A supportive macroeconomic backdrop is expected to further aid the sector in the near to medium term. They anticipate healthy listing gains and remain constructive on the stock from a medium- to long-term perspective. Moreover, ongoing investments in digitalisation and AI are seen as key to improving operational efficiency. Currently, HDB operates with a cost-to-income ratio of 42.8 percent, notably higher than Bajaj Finance’s 34.2 percent, indicating room for margin improvement.