HDB Financial IPO Coming Soon? Will It Add Value to HDFC Bank?

HDB Financial IPO is one of the most awaited Initial public offerings for retail investors. It is HDFC Bank's Non-banking financial services arm, valued at near to $8 Billion. The shares of HDB are trading at a premium valuation in the OTC market, which shows the positive sentiment of investors. 

On the other hand, HDFC Bank share price in the listed exchanges NSE, BSE is showing underperformance over the last three years. So, streets are searching for ways which might reverse the trend of HDFC Bank. 

HDB Financial IPO could become the biggest hit for HDFC Bank investors. In the near term, the value unlocking of HDB Financial could increase the potential interest for the shareholders of the HDFC Bank. As per RBI regulation, HDB Financial is an upper-layer NBFC so, it has to be listed by the end of 2025. 

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HDB Financial Services Performance Update

HDB Financial Services improved its financial performance in terms of asset growth and asset quality. By the end of December 2023, the company's AUM stood at Rs 83,989 crore.  

The AUM grows at a CAGR of 8.4% in the last five years. Secured loans stood at 75.8% of the total portfolio and 24.2% is unsecured loans.

Company's gross NPA has reduced to 2.25% as on 31 December 2023, from 2.73% as on 31 March 2023. They had kept the provision coverage ratios 68% as of 31 December 2023.

HDB Financial reported a strong net interest margin of 7.7% in the third quarter of financial year 2024. The company's profitability also significantly improved, with the return on assets rising to 3.1% in the last 9 months against 1.62% in FY22.

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What Investors Should Do? 

India's renowned HDFC Group has incubated many financial services business HDFC Life, Gruh Finance, HDFC AMC like, which is quite successful and trading at premium valuation. It is possible that HDB financials IPO may get a good response from the investors and positively impact the sentiment of the share price of HDFC bank. 

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