HDB Financial’s IPO Gears Up for June 25 Launch Amid Discounted Valuation and Investor Curiosity

HDB Financial Services, the non-banking financial company (NBFC) backed by HDFC Bank, is set to launch its much-anticipated ₹12,500 crore initial public offering (IPO) between June 25 and June 27, 2025. The offering, which includes both a fresh issue and an offer-for-sale component, is one of the most closely watched in India’s financial sector this year. With analysts eyeing valuation metrics and governance independence, HDB’s leadership has stepped up public engagement to clarify investor concerns. Managing Director and CEO Ramesh G, in a detailed media interaction, offered insights into the valuation process, capital requirements, regulatory views, and future roadmap. The IPO comes at a time when the Reserve Bank of India (RBI) is tightening regulatory scrutiny over NBFCs operating parallel to banks, particularly in light of circulars examining business overlaps.

IPO Valuation Shaped by Investor Dialogue and Market Sentiment

Ramesh G, HDB’s Managing Director and CEO, emphasized that the company’s IPO valuation wasn’t arbitrarily decided, but carefully derived after engaging with both domestic and global institutional investors over an extended series of roadshows. According to Ramesh, discussions with book-running lead managers and feedback from a diverse investor pool played a pivotal role in pricing the offer. Rather than chasing aggressive valuations, HDB sought to establish a fair market value that reflects sustainable business strength. He noted that while some may view the IPO price as “discounted,” it was in alignment with prevailing sentiments in the financial services sector. The approach prioritizes long-term shareholder value and signals management’s confidence in post-listing performance. The IPO is structured to ensure HDFC Bank retains a 75% stake, allowing HDB to remain a subsidiary even after listing.

Highlights

• Valuation set through extensive investor and banker discussions.

• IPO pricing reflects current market sentiment in the NBFC sector.

• HDFC Bank will continue to hold a 75% stake post-listing.

• Focus on long-term value creation over inflated near-term pricing.

Also Read : RBI Tightens Oversight on Derivatives, Treasury Ops of Private and Foreign Banks

Independent Operating Model Distinct from Parent HDFC Bank

Ramesh clarified that while HDB Financial is a wholly owned subsidiary of HDFC Bank, its operations are independent and self-sustaining. The NBFC has developed its own risk frameworks, technology infrastructure, and customer acquisition channels. Contrary to assumptions, there is no shared physical infrastructure with the parent bank, nor are leads routed through HDFC Bank. Since inception, HDB has built its portfolio organically, servicing underbanked and underserved markets. Its robust retail-focused model, with negligible exposure to large-ticket corporate lending, allows it to operate with granularity. As of FY25, the NBFC has expanded to 1,770 branches across 1,100 cities, serving a customer base of 19 million, a dramatic rise from 9 million in FY22.

Highlights

• HDB operates independently of HDFC Bank in risk and infrastructure.

• No customer acquisition or branch sharing with HDFC Bank.

• 1,770 branches across 1,100 cities serving 19 million customers.

• Exclusive focus on granular, retail-based loan origination.

Regulatory Concerns on Business Overlap and RBI’s Draft Guidelines

The IPO comes at a sensitive juncture for NBFCs, with the RBI having circulated a draft framework addressing the overlapping nature of bank-NBFC business models. This is particularly relevant to bank-owned NBFCs such as HDB. Ramesh responded to concerns by asserting that HDB caters to a distinct borrower base and strictly avoids activities that exploit regulatory arbitrage. The firm’s credit underwriting policies are tailored to retail lending risk profiles, and it deliberately stays away from business segments prohibited to banks. Ramesh also emphasized that HDB does not rely on HDFC Bank’s capital or operational infrastructure for lending operations. While the RBI circular remains a draft, HDB has submitted feedback and is prepared to comply with any final directions issued by the regulator.

Highlights

• RBI draft guidelines scrutinize business overlap in bank-owned NBFCs.

• HDB claims no engagement in regulatory arbitrage or prohibited activities.

• Company has provided feedback to the RBI on the draft circular.

• Emphasis on maintaining regulatory compliance and distinct customer base.

Capital Raise to Fund Growth Ambitions, Not Cover Deficiencies

Addressing investor questions on the rationale for raising fresh capital despite strong capital adequacy ratios, Ramesh noted that the fundraising is aimed at preparing for scalable future growth. The NBFC is eyeing multiple growth avenues in the next 3–4 years, and the ₹12,500 crore IPO will provide a strong war chest to capitalize on emerging lending opportunities. HDB believes that a combination of internal accruals and fresh equity infusion offers the best foundation for long-term expansion. The IPO is designed as a milestone on a broader journey, not a liquidity event. Ramesh also ruled out any immediate plans for further stake sales or foreign investor deals, citing the need to focus on stabilizing as a listed entity before entertaining strategic partnerships.

Highlights

• Fresh capital to fund growth plans, not to cover capital shortfalls.

• IPO provides long-term funding for expansion over the next 3–4 years.

• No immediate plan for further stake sale or foreign investment.

• Management treats the IPO as a milestone, not an exit strategy.

Risk Management and Credit Discipline Underpin Business Model

HDB Financial has strategically avoided high-risk lending environments by focusing on geographies and segments where it can maintain long-term customer relationships. Ramesh highlighted that the company’s credit underwriting relies on understanding the borrower’s lifecycle and continuous engagement rather than transactional lending. This strategy has contributed to a lower delinquency rate in retail unsecured lending, which has seen pressure across the industry. HDB has also maintained strong collection metrics by deploying locally familiar teams and investing in digitization to monitor portfolios. With average loan sizes around ₹1.5 lakh and top 20 borrowers accounting for less than 0.4% of AUM, the company’s risk exposure is widely distributed and tightly controlled.

Highlights

• Lending focused on geographies with continuous customer engagement.

• Unsecured loan risk mitigated through underwriting discipline.

• Low concentration risk; top 20 clients form <0.4% of AUM.

• Average loan size remains modest at ₹1.5 lakh.

Long-Term Business Vision Anchored in Product Diversification

As part of its forward-looking strategy, HDB Financial aims to deepen its product portfolio and increase customer engagement across financial lifecycles. Ramesh stated that the NBFC has historically introduced new product lines almost every other year, allowing it to stay agile and responsive to evolving customer needs. Some of the products—especially those in secured lending and asset-backed financing—are now over 15 years old and have matured well. The company is placing increased emphasis on cross-selling and lifecycle-based financial planning, targeting repeat business from its growing customer base. Ramesh is optimistic about maintaining growth momentum across verticals, especially in the wake of rising credit demand from Tier-2 and Tier-3 cities.

Highlights

• Strategy built on continuous product innovation and diversification.

• Mature products now cross 15-year history in the loan portfolio.

• Strong focus on cross-sell and long-term customer lifecycle engagement.

• Tier-2 and Tier-3 markets seen as growth catalysts.