HDB financial IPO | India's Largest ₹12,500 crore NBFC IPO

HDB Financial Services IPO: What You Need to Know.

HDB Financial Services IPO has garnered attention across various sectors, and here is what you can expect from this IPO.

HDB Financial Services, owned by the HDFC Bank, has announced an IPO of 12,500 crores and of this, 10% will be allocated to HDFC Bank shareholders. HDB Financial Services caters to middle-income families and MSMEs. 

HDB Financial Services was registered as an NBFC in June 2007, and HDFC Bank owns 94.6% stake. The company has launched a variety of financial products for the retail and MSME sectors.

Detailed Video

Below is an outline of its loan segmentation: – 

Enterprise Lending: This provides MSMEs with secured and unsecured loans.

 

Asset Finance: Income generating assets such as vehicles or equipment are financed through this type of secured loan.

Consumer finance: loans for consumer products as well as personal loans. 

At the moment, HDB Financial Services has a loan portfolio of around 98,624.2 crores with the 3 categories mentioned above. 

 

Considering the demand generated from MSMEs and middle income families, the demand for NBFCs in India has increased substantially.

HDB Financial Services has carved a niche for itself but still has its fair share of competitive and regulatory aspects. Additionally, the growth in credit in the NBFC sector has also helped in expansion of the loan book as well.

Key Industry Trends:

• There is a rise in the number of MSMEs requesting for credit. 

• The segment that deals in secured asset finance mostly including vehicle and equipment finance is performing well. 

• There is increased competition in the fields of NBFCs and the traditional mode of banking. 

 

IPO Summary and Financial Snapshot

Details regarding pricing has not been out yet as company has just filed DRHP. It will take some time to get the price range.

Shareholder Quota: 

This IPO has been reserved 10% for HDFC Bank's shareholders. HDFC shareholders who meet the criteria are restricted to a single application with a bid of up to 2,00,000 rupees. 

Financial Highlights: 

The steady growth in revenue earnings has firmly been in focus due to its concentration and aim at retail as well as MSME sub segments. The numbers are very good.

 

Impact on HDFC Bank

HDFC Bank is poised to enjoy several benefits from the impending IPO:

Stake Sale Through OFS: HDFC Bank is set to collect money in the region of ₹10,000 crores which it can funnel back into its operations to improve its customer offerings. 

Value Unlocking: The HDB Financial Services public offering is going to create an advantage for HDFC Bank in the form of a one-off income able to be added onto its liability side.

Market Cap Contribution: Market analysts expect that HDB will increase HDFC Bank’s total market cap by more than 3%.

 

Key Risks for HDB Financial Services

HDB Financial Services images possess a very high growth yet performance could be deviant due to so many factors:

Economic and Interest Rate Risks: 

Considerable and Great change to the economic surrounding or the interest rates could have adverse effects on the stability of the financial network and the loan demand. 

 

Loan Default and Recovery Challenges: 

Company’s considerable extent of unsecured loans heighten risk of loan default and recovery from secured loans can also be problematic because of issues related to collateral. 

 

Growth Sustainability:

The trend of increasing market share in this particular market may be difficult to maintain in the long run, considering the level of competition. 

Competitive and Regulatory Pressures: HDB is under stiff competition and further is constrained by the RBI, which may present continuing problems. 

 

Conclusion

HDB’s Severance IPO will leave very much to be desired indeed, especially for the shareholders of HDFC Bank – the institution which purchased large blocks of HDB shares in the early stages of its IPO placement for a discounted price. 

HDB could be singled out among the major non-banking financial company organizations of India based upon its fairly diversified portfolio of retail and MSME loans. 

 

Disclaimer: As it has always been, potential investors have to do their own due diligence in terms of finances, company and industry before they put money for investment purposes.