HDB Financial awaits parent’s approval to begin IPO journey

“We are ready; it’s just that when we will be asked to, the parent decides something – this is one of those,” said Rohit Patwardhan, chief credit officer at HDB Financial Services. “It (IPO) is still in early stages but from a readiness standpoint since we are debt listed as far as compliance, documentation and reporting are concerned, we are there.”

HDB is in the upper layer of NBFCs. This means it needs to be listed by September 2025 under regulatory guidelines. As per an ET report, the NBFC could fetch a valuation in the range of $9 billion to $12 billion during the IPO.

The non-bank lender is also looking to increase its current branch presence as it prepares to penetrate deeper into geographies with microfinance products. It has 1,600 branches at the moment.

“We will continue to increase our branch presence as we proceed, for the current financial year we are looking to add anywhere between 150 and 200 branches,” he said.The non-bank lender also said that it is not wary about the Reserve Bank of India increasing risk weights on the unsecured loans as it has a well-balanced book where secured has a lot of growth avenues. As per the lender, less than a fourth of its book is unsecured.”We have been very selective in how we do lending, as far as unsecured is concerned we assess cash flows at where the customer works and it works to our advantage,” Patwardhan said. “Meeting customers, understanding cash flows and having local sets of knowledge coupled with bureau information and a large digital stack allows us to look through a lot of information. We have been relatively careful to not get into buy-now-pay-later products.”In November last year, the banking regulator directed banks to set aside more capital as risk weights for loans disbursed toward unsecured personal loans, credit cards and lending to NBFCs. This was done to rein in the inordinate rise in such loans.

At the end of March 2024, HDFC Bank held a 94.6% stake in HDB Financial Services.

For the quarter ended March 31, 2024, the non-bank lender’s profit after tax was ₹2,460 crore versus ₹1,960 crore same period last year.

The total loan book stood at ₹90,200 crore as of March 31, 2024, compared to ₹70,000 crore same period last year. Stage 3 loans were at 1.90% of gross loans. The total capital-to-risk-weighted assets ratio (CAR) was at 19.2% with tier-I CAR at 14.1%.