HDB Financial Services IPO Hits Full Subscription on Day 2: Investors Bet Big on HDFC’s NBFC Arm:The financial markets in India are abuzz with excitement as the HDB Financial Services IPO hits full subscription on Day 2, signaling strong investor confidence in HDFC Bank’s non-banking financial company (NBFC) arm. As one of the largest NBFC IPOs in India’s history, this ₹12,500-crore public offering has captured the attention of retail investors, high-net-worth individuals (HNIs), and institutional buyers alike. But what’s driving this frenzy? Why are investors betting big on HDFC’s NBFC arm?
In this comprehensive article, we’ll dive deep into the details of the HDB Financial Services IPO, exploring its structure, financial performance, growth prospects, and the factors fueling its rapid subscription. Whether you’re an investor looking to understand the hype or simply curious about India’s booming NBFC sector, this guide will provide actionable insights, expert analysis, and answers to your burning questions. Let’s unpack why this IPO is a game-changer and what it means for the future of financial services in India.
What Is the HDB Financial Services IPO?
Contents
- 1 What Is the HDB Financial Services IPO?
- 2 Why Investors Are Betting Big on HDB Financial Services
- 3 Day-by-Day Subscription Breakdown
- 4 Comparing HDB Financial Services with NBFC Peers
- 5 Risks to Consider Before Investing
- 6 How to Apply for the HDB Financial Services IPO
- 7 FAQ Section
- 7.1 What Is the HDB Financial Services IPO, and Why Is It Significant?
- 7.2 Why Did the HDB Financial Services IPO Achieve Full Subscription on Day 2?
- 7.3 How Does HDB Financial Services Compare to Other NBFCs?
- 7.4 What Are the Risks of Investing in the HDB Financial Services IPO?
- 7.5 How Can Investors Apply for the HDB Financial Services IPO?
- 7.6 What Is the Expected Listing Gain for the HDB Financial Services IPO?
- 8 Conclusion: Is the HDB Financial Services IPO a Smart Investment?
Overview of the IPO
HDB Financial Services, a subsidiary of HDFC Bank, launched its much-anticipated initial public offering (IPO) on June 25, 2025, aiming to raise ₹12,500 crore. The IPO, which closed on June 27, 2025, is the largest-ever by an NBFC in India, surpassing previous records in the sector. It comprises:
- Fresh Issue: ₹2,500 crore to strengthen the company’s Tier-I capital base for future lending growth.
- Offer for Sale (OFS): ₹10,000 crore, with HDFC Bank divesting part of its 94.36% stake, reducing it to approximately 74.2% post-IPO.
The price band was set at ₹700–₹740 per share, with a minimum lot size of 20 shares, requiring a retail investment of ₹14,800 at the upper end. The IPO saw a robust response, achieving full subscription on Day 2, driven by strong demand from non-institutional investors (NIIs), employees, and HDFC Bank shareholders.
Why the IPO Matters
The HDB Financial Services IPO is significant for several reasons:
- Regulatory Compliance: As an “Upper Layer” NBFC per the Reserve Bank of India (RBI) guidelines, HDB Financial Services is mandated to list by September 2025.
- Market Milestone: It’s the largest NBFC IPO in India, following Hyundai India’s ₹27,000-crore offering, and the first public issue from the HDFC group since HDFC Life Insurance in 2017.
- Investor Confidence: The rapid subscription reflects trust in HDB’s diversified portfolio, strong parentage, and growth potential in India’s financial sector.
Why Investors Are Betting Big on HDB Financial Services
Strong Parentage of HDFC Bank
HDB Financial Services benefits immensely from its association with HDFC Bank, India’s largest private-sector lender by assets. This pedigree provides:
- Access to Low-Cost Funds: HDB enjoys a AAA (Stable) credit rating from CRISIL and CARE, enabling it to borrow at competitive rates.
- Brand Trust: The HDFC name instills confidence among investors and customers, enhancing HDB’s market credibility.
- Operational Synergies: While maintaining arm’s-length transactions, HDB provides business process outsourcing (BPO) services to HDFC Bank, contributing 7.5% to its revenue.
Diversified Business Model
HDB Financial Services operates across three core verticals, ensuring a balanced and resilient portfolio:
- Enterprise Lending (39.3%): Secured and unsecured loans to micro, small, and medium enterprises (MSMEs) and salaried professionals.
- Asset Finance (38%): Secured loans for commercial vehicles, construction equipment, and tractors.
- Consumer Finance (23%): Secured and unsecured loans for personal expenses, consumer goods, and vehicles.
This diversification mitigates risks associated with any single segment, with 73% of its loan book being secured, reducing exposure to defaults.
Robust Financial Performance
HDB Financial Services has demonstrated consistent growth, as highlighted in its financials:
| Metric | FY22 | FY23 | FY24 | FY25 (Projected) |
|---|---|---|---|---|
| Revenue (₹ crore) | 11,306.29 | 12,402.88 | 14,171.12 | ~14,000+ |
| Profit After Tax (₹ crore) | 1,011.4 | 1,959.35 | 2,460.84 | 2,175.9 |
| Loan Book (₹ crore) | ~70,000 | ~80,000 | 90,220 | 1,06,000 |
| Gross NPA (%) | ~2.0% | 1.9% | 1.9% | 2.26% |
| Return on Equity (%) | ~10% | ~14% | 16.39% | 14.72% |
- Loan Book Growth: A 23.5% CAGR from FY22 to FY25, reaching ₹1.06 lakh crore by March 2025.
- Profitability: Profit after tax nearly doubled from FY22 to FY24, though FY25 saw a 26% decline due to higher provisions for Stage 3 assets.
- Asset Quality: Gross non-performing assets (GNPAs) at 2.26% and net NPAs at 0.99%, competitive among peers like Bajaj Finance and Cholamandalam.
Rural and Semi-Urban Focus
HDB’s “phygital” (physical + digital) model has enabled it to penetrate underbanked markets:
- Branch Network: Over 1,772 branches across 1,162 towns, with 80% in semi-urban and rural areas.
- Customer Base: Serving 19.2 million customers as of March 2025, with a 25.45% CAGR over two years.
- Low Concentration Risk: Top 20 customers account for less than 0.36% of the loan book, ensuring a granular portfolio.
This focus aligns with India’s growing demand for financial inclusion, particularly in Tier 4+ towns, where 70% of HDB’s branches are located.
Analyst Recommendations
Brokerages like SBI Securities, Anand Rathi, and Geojit Investments have issued “Subscribe” ratings, citing:
- Fair Valuation: At ₹740, HDB’s price-to-book (P/B) ratio of 3.4x (post-issue) is lower than peers like Bajaj Finance (6x) and Cholamandalam (5.5x).
- Growth Prospects: NBFC credit is projected to grow at 15–17% CAGR from FY25 to FY28, per CRISIL, with HDB well-positioned to capitalize.
- Strong Governance: Backed by HDFC Bank’s robust risk management and high credit rating.
However, some caution that the IPO’s valuation may be fully priced, and potential RBI regulations requiring HDFC Bank to reduce its stake below 20% could impact future stock performance.
Day-by-Day Subscription Breakdown
Day 1: A Steady Start
On June 25, 2025, the IPO saw a 37% subscription, with:
- Non-Institutional Investors (NIIs): 76% subscription, leading the charge.
- Retail Individual Investors (RIIs): 30% subscription, indicating cautious retail participation.
- Qualified Institutional Buyers (QIBs): 1% subscription, as institutional investors typically wait until the final day.
- Employee Quota: 1.75x oversubscribed, reflecting strong internal confidence.
- Shareholder Quota: 0.68x subscribed, with HDFC Bank shareholders eligible for a ₹1,250-crore reserved portion.
HDB raised ₹3,369 crore from anchor investors, including LIC, Goldman Sachs, BlackRock, and 22 domestic mutual funds, signaling robust institutional backing.
Day 2: Full Subscription Achieved
By the end of Day 2 (June 26, 2025), the HDB Financial Services IPO hit full subscription at 116% overall:
- NIIs: 2.29x subscribed, reflecting strong HNI demand.
- QIBs: 90% subscribed, showing growing institutional interest.
- RIIs: 64% subscribed, with retail participation picking up.
- Employee Quota: 2.97x subscribed.
- Shareholder Quota: 1.68x subscribed.
This rapid subscription underscores investors betting big on HDFC’s NBFC arm, driven by its diversified portfolio and growth potential.
Comparing HDB Financial Services with NBFC Peers
To understand HDB’s market positioning, let’s compare it with leading NBFCs:
| NBFC | AUM (₹ crore) | Gross NPA (%) | P/B Ratio | P/E Ratio | RoE (%) |
|---|---|---|---|---|---|
| HDB Financial Services | 1,07,000 | 2.26% | 3.4x | 27.1x | 14.72% |
| Bajaj Finance | ~2,50,000 | 0.9% | 6x | 33.5x | 22% |
| Cholamandalam | 1,84,000 | 1.3% | 5.5x | 30.6x | 18% |
| Shriram Finance | 2,63,000 | 2.8% | 2.5x | 15x | 15% |
| L&T Finance | ~1,00,000 | 2.5% | 2.5x | 18x | 12% |
- HDB’s Edge: Lower P/B and P/E ratios suggest it’s priced attractively compared to Bajaj Finance and Cholamandalam, though its RoE lags behind.
- Risks: Higher GNPA (2.26%) than Bajaj and Cholamandalam, and 27% of its portfolio being unsecured loans, which are riskier.
Risks to Consider Before Investing
While the HDB Financial Services IPO is promising, investors should be aware of potential risks:
- Asset Quality Concerns: GNPA rose from 1.9% to 2.26% in FY25, driven by delinquencies in unsecured loans.
- Regulatory Overhang: RBI’s draft norms may require HDFC Bank to reduce its stake below 20%, potentially impacting HDB’s stock price.
- Economic Sensitivity: A macroeconomic downturn could affect loan repayments, as noted in the DRHP.
- Competition: New-age fintechs and established NBFCs like Bajaj Finance pose challenges in a maturing market.
How to Apply for the HDB Financial Services IPO
Investors can apply via platforms like HDFC Sky or other brokers using UPI-based ASBA:
- Log In: Access the IPO section on your broker’s app or website.
- Select IPO: Choose “HDB Financial Services IPO” from the list.
- Enter Bid Details: Specify the number of lots (minimum 20 shares) and price within ₹700–₹740.
- Choose Payment Method: Select UPI and authorize the mandate.
- Submit: Review and confirm your application.
Key Dates:
- Allotment Finalization: June 30, 2025
- Share Crediting: July 1, 2025
- Listing Date: July 2, 2025 (BSE and NSE)
External Links:
Internal Links:
FAQ Section
What Is the HDB Financial Services IPO, and Why Is It Significant?
The HDB Financial Services IPO is a ₹12,500-crore public offering by HDFC Bank’s NBFC arm, launched on June 25, 2025. It’s the largest NBFC IPO in India, combining a ₹2,500-crore fresh issue and a ₹10,000-crore OFS. Its significance lies in its scale, regulatory compliance with RBI’s listing mandate for Upper Layer NBFCs, and strong investor interest, as evidenced by full subscription on Day 2. Backed by HDFC Bank, HDB’s diversified portfolio and 23.5% CAGR loan book growth make it a compelling investment. The IPO’s success reflects confidence in India’s NBFC sector, projected to grow at 15–17% CAGR through FY28.
Why Did the HDB Financial Services IPO Achieve Full Subscription on Day 2?
The IPO’s rapid subscription is driven by several factors. First, HDB’s association with HDFC Bank provides brand credibility and access to low-cost funds, bolstered by its AAA credit rating. Second, its diversified loan portfolio across enterprise lending, asset finance, and consumer finance appeals to investors seeking stability. Third, the IPO’s valuation at a 3.4x P/B ratio is competitive compared to peers like Bajaj Finance (6x). Strong demand from NIIs (2.29x subscribed) and employees (2.97x) on Day 2, coupled with ₹3,369 crore from anchor investors like LIC, fueled the momentum.
How Does HDB Financial Services Compare to Other NBFCs?
HDB Financial Services stands out for its scale (₹1.07 lakh crore AUM) and diversified portfolio, but it faces stiff competition. Compared to Bajaj Finance (₹2.5 lakh crore AUM, 0.9% GNPA), HDB has a higher GNPA (2.26%) but a lower P/B ratio (3.4x vs. 6x). Cholamandalam (₹1.84 lakh crore AUM) has better asset quality (1.3% GNPA) but a higher valuation (5.5x P/B). Shriram Finance and L&T Finance have comparable GNPAs but trade at lower multiples. HDB’s rural focus (80% branches in non-metro areas) and HDFC backing give it an edge in underserved markets.
What Are the Risks of Investing in the HDB Financial Services IPO?
Investing in HDB’s IPO carries risks. Asset quality is a concern, with GNPA rising to 2.26% in FY25 due to unsecured loan delinquencies (27% of portfolio). Regulatory risks include potential RBI norms requiring HDFC Bank to reduce its stake below 20%, which could pressure the stock price. Economic downturns may impact loan repayments, as noted in the DRHP. Additionally, competition from fintechs and established NBFCs like Bajaj Finance could challenge growth. Investors should weigh these risks against HDB’s strong fundamentals and long-term potential.
How Can Investors Apply for the HDB Financial Services IPO?
To apply, use a broker like HDFC Sky or ICICI Direct. Log into the IPO section, select “HDB Financial Services IPO,” enter your bid (minimum 20 shares at ₹700–₹740), and authorize payment via UPI. HDFC Bank shareholders as of June 19, 2025, can apply under the shareholder quota (₹1,250 crore reserved). The allotment is expected on June 30, with shares credited by July 1 and listing on July 2, 2025. Ensure your demat account is linked for seamless processing.
What Is the Expected Listing Gain for the HDB Financial Services IPO?
The grey market premium (GMP) for HDB’s IPO was ₹74–₹100 before listing, suggesting a potential 10–13.5% gain over the ₹740 upper band. However, GMPs are speculative and not guaranteed. Analyst ratings from SBI Securities and Geojit suggest long-term upside due to HDB’s 23.5% loan book CAGR and 15–17% NBFC sector growth. Investors should consider HDB’s fundamentals, such as its 14.72% RoE and competitive valuation, rather than relying solely on GMP for listing gain expectations.
Conclusion: Is the HDB Financial Services IPO a Smart Investment?
The HDB Financial Services IPO hitting full subscription on Day 2 underscores its appeal as a robust investment opportunity in India’s NBFC sector. With HDFC Bank’s backing, a diversified loan portfolio, and a strong presence in underbanked markets, HDB is well-positioned for growth. Its competitive valuation (3.4x P/B) and analyst endorsements make it attractive, though risks like asset quality and regulatory changes warrant caution.
For investors, the IPO offers a chance to tap into India’s financial inclusion story, driven by HDB’s phygital model and 19.2 million-strong customer base. Whether you’re a retail investor or an HNI, consider your risk appetite and long-term goals before investing. Share your thoughts in the comments below, or sign up for our newsletter for the latest IPO updates!