HDFC Bank greenlights HDB Financial Services IPO, explores additional stake sale

The management mentioned the possibility of exploring a stake sale outside the HDB Financial IPO process

India's largest private lender, HDFC Bank, has approved the initiation of the listing process for its subsidiary, HDB Financial Services, through an initial public offering (IPO). Additionally, the management mentioned the possibility of exploring a stake sale outside the HDB Financial IPO process during their earnings conference call on July 20.

"The board has given a nod to start the HDB Financial IPO in today's meeting, with the mandatory requirement for the IPO to be completed by September 2025. Outside of the HDB Financial IPO process, we are open to exploring a stake sale. But, as of now, there is nothing on the table," the management stated following the announcement of tepid results for the quarter ended June (Q1FY25).

Currently, HDFC Bank owns a 94.6 percent stake in HDB Financial. HDB Financial is one of India's largest non-bank lenders, offering a variety of loans and financial services to individual borrowers, as well as medium, small, and micro business enterprises.

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In the fiscal year 2023-24, HDB Financial's total revenue from operations increased to Rs 14,171 crore from Rs 12,402 crore in the previous year. Profit for the year also rose to Rs 2,460 crore in FY24 from Rs 1,959 crore in FY23.

Meanwhile, HDFC Bank reported a 2 percent quarter-on-quarter drop in Q1 profit to Rs 16,174 crore from Rs 16,510 crore, attributed to lower income growth and higher tax expenses, while net interest income rose 2 percent quarter-on-quarter to Rs 29,837 crore.

The bank's asset quality also worsened. The gross non-performing asset (NPA) ratio increased by 9 basis points (bps) sequentially to 1.3 percent, while net NPA rose by 6 bps to 0.4 percent in Q1FY25.

During the quarter, retail loans grew by around Rs 18,600 crore, commercial and rural banking loans grew by around Rs 7,200 crore, and corporate and other wholesale loans decreased by Rs 26,600 crore compared to March 31, 2024.

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