HDB Financial FY25: Growth Rises, Profits Fall – Why?

📈 Growth vs. Profit: The HDB Financial Services FY25 Puzzle

HDB Financial Services (HDBFS), a high-growth NBFC backed by HDFC Bank, posted a 19% jump in its loan book—crossing ₹1.03 lakh crore in FY25. However, its profit after tax (PAT) slid approximately 11–12%, largely due to rising provisioning and weakening asset quality.

Let’s unpack the numbers and what they mean for investors:

1. Loan Book & Interest Income Surge

  • Loan portfolio reached ₹1,03,343 crore, up 19.2% YoY (ipocentral.in, indiaipo.in).

  • Interest income soared 24% to ₹13,835 crore (ipocentral.in), supporting strong top-line growth.

  • The loan book is wide-ranging, including enterprise, asset finance, and consumer loans, and serves over 1.9 crore customers across 1,771 branches (unlistedzone.com, ipocentral.in).

2. Profit Dip & Rising Provisioning

  • PAT dropped to ₹2,176 crore from ₹2,461 crore (-11.6%) (stockmarkets.co.in).

  • Provisions nearly doubled to ₹2,113 crore, reflecting elevated provisioning requirements (unlistedzone.com).

  • In Q4, the PAT was ₹530.9 crore, down ~20% YoY but recovering from earlier quarters (ipocentral.in).

3. Asset Quality Under Pressure

  • Gross Stage-3 (NPA) ratio rose to 2.26%, while net NPA nearly doubled to 0.99% (ipocentral.in).

  • The provision coverage ratio (PCR) fell to ~56% from previous levels (ipocentral.in).

  • This increase is driven largely by stress in retail and MSME loans, especially unsecured personal loans (unlistedzone.com).

4. Operational Scale & Strategy

  • HDBFS now manages over ₹1.07 lakh crore in AUM, making it one of India’s largest retail NBFCs (valueresearchonline.com).

  • With a CAGR of ~24% in AUM and 5.4% in PAT over FY23–25, the firm is scaling rapidly (valueresearchonline.com).

  • A robust omni-channel footprint: 1,771 branches, a digital app with millions of downloads, and wide MSME/retail distribution (images.icicidirect.com).

5. Key Metrics & Peer Comparison

Metric HDBFS FY25 Peers (Bajaj, Cholamandalam, Sundaram)
AUM ₹1.07 lakh cr Bajaj: ₹4.2 lakh cr; Cholamandalam: ₹1.84 lakh cr (icicidirect.com)
NIM ~7.6% Bajaj:12.1%, Cholamandalam:6.8%, Sundaram:5.3%
GNPA 2.3% Bajaj:1.1%, Cholamandalam:2.8%, Sundaram:1.4%
Net NPA 0.99% Bajaj:0.6%, Cholamandalam:1.5%, Sundaram:0.8%
ROE 14.7% Bajaj:14.6%, Cholamandalam:19.7%, Sundaram:15.0%
RoA 2.2% Bajaj:5.0%, etc.
Borrowing Cost 7.9% Bajaj/Sundaram ~7.4%

Insight: HDBFS is growing fast with a granular portfolio, but asset quality and NIMs lag behind top-tier peers.

6. IPO Outlook & Future Plan

  • ₹12,500 crore IPO launched in June–July 2025, split into ₹2,500 cr fresh issue & ₹10,000 cr offer for sale (valueresearchonline.com).

  • Promoter stake post-IPO to be around 74%, complying with RBI’s norms (images.moneycontrol.com).

  • Anchor book attracted ₹3,369 cr, and analysts largely recommended “Subscribe” (ipocentral.in).

  • Valuation: At upper band, P/E ~28x; analysts see long-term growth potential despite near-term margin pressure (valueresearchonline.com).

7. Risks & What to Watch

  • Rising NPAs in unsecured retail and MSME could pressure margins and provisioning.

  • High leverage (~6.5× debt/equity) exposes it to interest rate movements (images.icicidirect.com).

  • Borrowing costs are already higher than peers—needs to improve funding efficiency (sptulsian.com).

  • On the positive, CRISIL AAA/CARE AAA ratings and strong underwriting mitigate risk (images.moneycontrol.com).

✅ Final Take

HDB Financial Services is riding a boom in its loan book and interest income while grappling with profit dip from rising NPAs and provisioning. With its IPO underway, the company stands at a critical junction—can it balance growth and asset quality?

For investors:

  • Focus on how HDB manages NPAs and provisioning trends in FY26.

  • Peer metrics suggest potential upside if NIMs expand and costs of borrowing decline.

  • The IPO offers long-term exposure to India’s expanding retail/MSME credit space—but short-term risks loom.

Would you like infographics comparing metrics, performance charts, or a video script for your YouTube channel on this analysis?

Location: India

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