Subscribe for HDB Financial Services Ltd IPO; Deven Choksey

Deven Choksey, has come out with its report on HDB Financial Services Ltd. The research firm has recommended to “ Subscribe” the ipo in its research report as on June 24, 2025.

Broker Research

June 25, 2025 / 12:55 IST

IPO

Deven Choksey, HDB Financial Services Ltd

HDB Financial Services Limited (HDB), a subsidiary of HDFC Bank, is the seventh-largest retail-focused NBFC in India by gross loan book and is classified as an Upper Layer NBFC by RBI. Despite promoter backing, it operates independently across sourcing, underwriting, operations, and risk management. Further, it offers BPO services to its parent and distributes insurance and other fee-based products. HDB focuses on low to middle-income borrowers across three segments - Enterprise Lending (39.3%), Asset Finance (38.0%), and Consumer Finance (22.7%). As of March 31, 2025, 73.0% of its loan book was secured. The company had 19.2 million customers and 1,771 branches across 1,170 locations, with over 70% in Tier 4 and beyond. Supported by a 38,326-strong sales team, it uses digital tools across operations. Financially, HDB reported a gross loan book of INR 1,068.8 billion and an AUM of INR 1,072.6 billion. It has secured CRISIL AAA/Stable and CARE AAA/Stable ratings, with a borrowing cost of 7.9% and a credit cost ratio of 2.1%. Despite increase in credit cost, it reported a ROE of 14.7% in FY25.

Valuation and Outlook

HDB’s initial issue is priced at 3.4x TTM P/B (considered equity raise for calculating TTM BV) compared to the peer average of 4.4x TTM P/B. We believe the issue is attractively priced considering its parentage, peer group ROA average and its growth potential. We assign a “SUBSCRIBE” rating to the initial issue of the HDB Financial Service.

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