Most of the news related to the Indian stock market is centered upon the IPOs and a key name that emerged is HDB Financial Services. This hugely awaited IPO, which is expected to bring in a whopping piracy of $12,500 crore, will be the highest NBFC o the stock exchange in india. A clinical summary follows regarding all the essential details about HDB Financial Services, its past and present performance, attributes, shortcomings and above, why everybody is talking about this IPO.
HDB Financial Services is an Indian company that provides various financial services and loans.
Firstly, HDB Financial Services categorizes the loans they provide into two types, consumer loans and business loans. Based on their classification, the ‘business loans’ include both secured and unsecured loans, while the consumers can borrow on a variety of assets, such as vehicles, properties and mobile phones.
Within its area of operations, the company appears to be doing quite well, boasting 1684 branches with over one million customers.
The Financial Performance of HDB Financial Services
However, within the NPFC section, this organisation has shown excellent growth and has great prospects moving forward.
icture the revenue growth in percentage terms:
Just in the last fiscal year, according to HDB results, its revenue amounted to 8319 crores, which is a growth of about 10 percent from the previous year.
Profitability:
Net earnings stood at ₹2,461 crore translating to a 25% growth and demonstrating consistent profitability.
Key Metrics:
Net Interest Margin (NIM): A 7.85% which is the 4th highest in the sector.
Non-Performing Assets (NPA): An impressive low NPA of 0.63%; this ratio is the second best in the market after Bajaj Finance.
These metrics indicate HDB’s profitability and ability to contain risks very well.
Why HDB Financial Services decided to launch IPO at this time?
Going public relates to the other directives given by the Reserve bank of India. In October 2022, RBI instructed that upper layer NBFC’s must be listed on the stock exchanges by September 2025. HDB Financial Services being in this category has to implement these directives.
Strengths of HDB Financial Services
Strong Brand Backing:
Being under HDFC, which is has a brand that is well recognized and trusted in India, is one of the biggest benefits for HDB.
Extensive Rural Penetration:
With HDB’s 71% of its branches located in Tier four towns and above, the banks` footprint in the underserved locations significantly positions the bank to compete in the less saturated areas.
Low NPAs:
Due to low loan defaults caused by robust risk management at HDB, the company represents a lower investment risk.
Multiple Channels for Revenue Generation:
In addition to offering loans, HDB has got into BPO either by opening up their front offices or off-shoring a part of the service, which in turn is said to have accounted to 7.5%.
Secured Lending Portfolio:
The concentration of HDB’s risk on about 71% of it’s loans being secured reduces the risk of defaults.
Weaknesses and Risks
However, while HDB is rather robust, there are still performance challenges that can be rather critical:
Margin Pressure:
As HDB matures, the raising of funds other than through HDFC Bank will change the cost structure for HDB and put pressure on net interest margins.
Intense Competition:
There is competition across the NBFC space with many new forms setting up in the rural areas and this can cause HDB to reduce rates of interest to get enough clients.
Regulatory Challenges:
There are several regulations by RBI that tend to change very often and this leads to a rise in cost as well as complexity in conducting operations.
Funding Brand and Business through HDFC:
HDB has a strong focus on HDFC in terms of raising funds, realising its brand and engaging in business. Thus, more control will be vital to achieve sustained growth in the long run.
In the Unlisted market Five Fold Growth Expectations enjoying Low pointing:
The unlisted market seems to be a sunning option for both pre IPO and investors looking for an early entry in HDB Financial Services shares for the business sells Entities hoping for this approach, There are no shortage challenges with this option and one such is the issue of pre funding and thus no waiting period.
Conclusion: Is it Worth Investing in HDB Financial Services IPO?
HDB Financial Services has a healthy balance sheet with low non pamamdent asset level and has made significant in roads in rural areas It enjoys the stamp of approval of the HDFC brand and therefore HDB has ample scope for growth. However, prospective investors have to keep an eye on competition and regulation risks.
As a tip when planning to buy equity shares of HDB Financial Services, look at your financial objectives – including your many goals and what risk tolerance you have, as well as the particular valuation of the firm in question. For many, this Initial Public Offering provides an opportunity for both listing gain and long term creation of wealth, but only when due diligence is exercised before taking the plunge.
Disclaimer: This article is intended for educational and informative only, and does not provide any type of financial advice. Please seek professional help from an officially licensed financial advisor before making major investment decisions.
