The company’s gross loan growth was in double digits in each of the three fiscal years to FY25.
However, it has lower net interest margin (NIM) and return on assets (RoA) compared with larger peers. It reported a fall in net profit for FY25 due to higher credit costs.
The draft RBI guidelines, which propose to avoid an overlap in the businesses of banks with their subsidiaries, are expected to have an overhang if implemented. They may even prompt banks to divest their stakes. Given these factors, investors may wait for more clarity after the listing.
AgenciesBusiness
HDB provides lending to enterprises (39.3% of loan book); asset financing including commercial vehicles, construction equipment (38%); and consumer financing (22.7%). Its gross loans increased by 23.5% annually to ₹1,06.877.6 crore between FY23 and FY25.
The company provides business process outsourcing (BPO) services including back office and collection services to HDFC Bank.
Financials
Net interest income (NII) increased by 17,3% annually to ₹7,445.6 crore in the three years to FY25. Net profit in FY25 improved to ₹2,175.9 crore from ₹1,59.4 crore in FY23 but fell year-on-year by 11.6%. NIM fell to 7.6% from 8.3% and cost-income ratio rose to 42.8% from 39% during the period. The gross nonperforming asset ratio was 2.3% in FY25 compared with 1.9% in the previous year and 2.7% in FY23. Revenue from BPO was ₹1,216.7 crore in FY25, forming 7.5% of income from operations worth ₹16,300.2 crore.
Valuation
HDB demands a post-IPO price-book multiple of up to 3.4 based on FY25 financials. Larger peers Bajaj Finance and Cholamandalam Investment and Finance trade at P/B of around 5.8. HDB’s discounted valuation reflects its lower margin and return ratios compared with peers. To be sure, HDB’s implied valuation is higher than HDFC Bank‘s trailing P/B of 2.9.