HDB Financial Services, the non-banking financial services arm of private sector lender HDFC Bank is set to go public, in what will be the biggest IPO so far in 2025.
The ₹12,500 crore public issue has in large part been necessitated by the Reserve Bank of India mandate that upper-layer NBFCs must list by September 2025. The issue will see parent HDFC Bank, which is the country's largest private sector lender, pare its stake via a ₹10,000 crore offer for sale (OFS) and HDB Financial will raise ₹2,500 crore in fresh issue of shares. The IPO will open for subscription on June 25 and close on June 27.
"Our company proposes to utilise the net proceeds from the fresh issue towards augmenting our Tier – I capital base to meet future capital requirements including onward lending, arising out of the growth of our business," HDB Financial said in its red herring prospectus.
What surprised many was the pricing of the issue. HDB Financial's IPO has been priced in ₹700-740 per share range, which notably is at a sharp discount to its valuation in the unlisted market. According to data from UnlistedZone, HDB Financial's unlisted shares were trading at close to ₹1,500 towards the end of September 2024. Even at the start of June, the stock had traded at ₹1,275 in the unlisted market.
What's behind the pricing of the issue?
"The IPO pricing is something that has been determined jointly by the entire syndicate. This is what we believe are the key strengths of the franchise and seeing how peers are trading, where we believe we want to keep it attractive for investors," said Sonia Dasgupta, head of investment banking division at JM Financial, one of the bankers to the issue.
Jibi Jacob, head of equity capital markets at Jefferies India also stated that the price had determined basis extensive roadshows and investor feedback.
"We have no influence on what is happening on the unlisted side. The IPO price discovery is far more scientific and is also the basis of the inputs that we receive from high quality investors," he said.
The Reserve Bank of India had come with a draft circular last year, where it had stated that multiple group entities within a bank would not be allowed to conduct similar business. The central bank hasn't come out with its final guidelines on that front yet. But, if that would be the case, then HDFC Bank may have to pare its stake in HDB Financial significantly. That likely will remain an overhang on HDB Financial's shares until clarity emerges from RBI.
HDB Financial's RHP does mention this as a key risk.
"Our promoter may be required to significantly reduce its ownership in our company, to less than 20 per cent (or any such higher percentage with prior RBI approval) on account of overlapping business with our promoter and one of the members of our promoter group if the draft circular issued by the RBI on October 4, 2024, is implemented in its current form, which may have a material adverse impact on our business operations, financial position and share price," it said.
HDFC Bank currently holds around 94 per cent stake in HDB Financial, which will come down to around 75 per cent, post the IPO.
In the year ended March 2025, HDB Financial reported a net profit of ₹2,176 crore, while revenue for the year stood at ₹16,300 crore. Its assets under management topped ₹1 lakh crore in 2025-26, growing 19 per cent year-on-year.
Among some of its rivals, the AUM of Bajaj Finance stood at ₹3.09 lakh crore in 2024-25, Shriram Finance had an AUM of ₹2.63 lakh crore, Cholamandalam Investment and Finance had an AUM of ₹1.84 lakh crore and Mahindra Finance's AUM was nearing ₹1.20 lakh crore, according to the HDB's RHP.
The financier focuses only on retail lending and has three major segments - enterprise lending, asset finance and consumer finance. As of March 31, 2025, enterprise loans (loans against property, business loans, and salaried personal loans) accounted for 39 per cent of its AUM. Asset Finance (commercial vehicle loans, construction equipment loans and tractor loans) contributed to 38 per cent of its AUM and consumer finance (auto loans, consumer durable, lifestyle product loans etc) accounted for around 23 per cent of its AUM.
According to HDB Financial's MD and CEO G. Ramesh, the company has serviced 19.2 million customers, through more than 1,700 branches, and its top 20 customers account for less than 0.34 per cent of its AUM.
"Our risk management principle has been product diversification, geographical diversification and customer diversification, which enables us to manage our business through cycles. Our customer growth has been more than 2 times, from about 9.4 million to 19 million customers in the last three years alone," said Ramesh.
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He pointed out that the NBFC was focused on the underbanked and underserved population. The Tier IV and beyond towns account for 71 per cent of its distribution.
Its gross NPAs (non-performing assets) in 2024-25 stood at 2.26 per cent, while net NPAs were at 0.99 per cent.
HDB Financial's IPO comes at a time when equity markets have been volatile given geopolitical and trade tariff-related tensions in the last few months. The volatility has had an impact on fundraising in the primary market. In 2025 till May, there were 16 IPOs, cumulatively raising ₹27,686.60 crore. In 2024, there were 91 IPOs, with companies cumulative raising close to ₹1.60 lakh crore.
