HDFC Bank’s shares jumps nearly 3% to hit intra-day high of Rs 1731.90 on NSE today after the bank’s board approved a Rs 12,500-crore IPO for its non-banking financial company (NBFC) arm, HDB Financial Services (HDBFS). The proposed initial public offering (IPO) will include a stake sale worth Rs 10,000 crore by HDFC Bank.
HDB Financial Services IPO Breakdown
The IPO will involve a fresh issuance of equity shares worth Rs 2,500 crore by HDBFS, in addition to the Rs 10,000-crore offer for sale (OFS) by HDFC Bank. This takes the total issue size to Rs 12,500 crore. The bank currently holds a 94.5% stake in HDB Financial.
Additionally when launched, this will be the largest IPO ever by an NBFC in India, marking a significant milestone for the financial sector.
Where Will be The Money Raised Wii Used?
The proceeds from the Rs 12,500-crore IPO are expected to be utilized for expanding HDB Financial Services’ lending book and enhancing its digital infrastructure, further solidifying its position in the NBFC sector. When launched, this will mark the largest IPO by an NBFC in India, representing a significant milestone for the financial sector.
Regulatory Compliance and Approvals
The bank stated in its stock exchange filing, “The board of directors of the bank at its meeting held on October 19, considered and approved the offer for sale of face value Rs 10 each of HDBFS, aggregating up to Rs 10,000 crore held by the bank in the proposed IPO, subject to market conditions, receipt of necessary approvals/ regulatory clearances and other considerations.”
Details regarding the IPO price and other specifics will be determined closer to the launch. This IPO will be the first for the HDFC group in six years.
The IPO complies with the Reserve Bank of India’s (RBI) regulatory framework introduced in October 2022. The RBI mandates that upper-layer NBFCs must be listed by September 2025.
Financial Performance and Loan Book of HBD Financial Services
HDBFS reported a net profit of Rs 590 crore for the quarter ending September 2024, down 2% from Rs 600 crore in the same quarter last year. As of September 30, 2024, the company’s loan book stood at Rs 98,600 crore, with distressed loans (stage three loans) at 2.10% of gross loans. The capital adequacy ratio for HDBFS is 19.3%.
HDB Financial lends primarily to individuals and small businesses, offering secured and unsecured loans, consumer loans, and loans against property.
HDFC Bank’s Q2FY25 Performance
HDFC Bank, the country’s largest lender, announced a net profit of Rs 16,820 crore for the second quarter of financial year 2025 (Q2FY25), reflecting a year-on-year (Y-o-Y) growth of 5.3%. The increase was driven by strong net interest income (NII) and reduced provisions.
Sequentially, the net profit rose 4% from Rs 16,175 crore reported in the first quarter of FY25 (Q1FY25). In Q2FY24, the bank had reported a net profit of Rs 15,976 crore for the corresponding period.
Net Interest Income and Margins
HDFC Bank recorded an NII of Rs 30,110 crore in Q2FY25, marking a 10% increase from the same quarter last year, supported by growth in advances. On a sequential basis, NII showed a slight increase from Rs 29,837 crore in Q1FY25. The bank’s net interest margin remained flat at 3.46% in Q2FY25, down marginally from 3.47% in the previous quarter.
Provisions and Asset Quality
Provisions for the lender stood at Rs 2,700 crore in Q2FY25, compared to Rs 2,602 crore in Q1FY25 and Rs 3,310 crore in Q2FY24. However, the bank’s asset quality showed signs of deterioration, with gross non-performing assets (NPAs) rising to 1.36% in Q2FY25, up from 1.33% in Q1FY25 and 1.34% in Q2FY24. Net NPAs were recorded at 0.41%, compared to 0.39% in Q1FY25.
HDFC Bank Stock Performance in Last One Year
HDFC Bank’s stock performance has shown mixed results recently. Over the past month, the stock recorded a negative return of 1%. In contrast, it delivered a positive return of 12.52% over the past six months.
Year-to-date figures remain in negative territory, with a decline of 1.60%. However, the stock has demonstrated resilience over the past twelve months, achieving a positive return of 10.67%.
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