Understanding HDFC Financial Services IPO: Key Facts & Risks

Welcome to our IPO video, where we dive into HDB Financial Services' business model, financials, risks, and more, including its unique valuation, assets, and promoter ownership reduction, all leading up to the company's upcoming initial public offering (IPO).

  • Here are the 23 bullet points summarizing the video:
  • The speaker, CA Rachana Ranade, welcomes viewers to a video about HDB Financial Services IPO.
  • She explains that the company is an NBFC (Non-Banking Financial Company) with a retail-focused business model.
  • The RHP (Red Herring Prospectus) for the IPO is 758 pages long, making it important to have a concise summary.
  • The speaker will cover the company's financials, risks, and valuation in this video.
  • She explains that the IPO has come at a discount of around 40-45% compared to the unlisted price.
  • This can be a risk for investors who are new to the stock market or investing in an unlisted category.
  • The speaker highlights the importance of understanding basic points about the unlisted category, including lock-in periods and discounts.
  • HDB Financial Services was incorporated in 2007 and has a Phygital presence (physical and digital) with over 80% of its branches located outside of the top 20 cities in India.
  • The company offers multiple customer segments, including enterprise lending, asset financing, consumer finance, and microfinance loans.
  • It also cross-sells general insurance, life insurance, health insurance, and BPO services.
  • The speaker discusses the company's revenue mix, with enterprise lending accounting for around 40%, asset financing around 38%, and consumer finance around 22%.
  • In terms of AUM (Assets Under Management), HDB Financial Services ranks fifth among its peers.
  • The company's profitability parameters are lower than those of its peers, including yield on advances, cost of borrowing, NII, ROA, and ROE.
  • The speaker highlights the importance of understanding asset quality, which has been rising for GNPA (Gross Non-Performing Assets) and NNPA (Net Non-Performing Assets).
  • Unsecured loan portfolio risk is another important consideration.
  • The speaker notes that there are risks associated with promoter ownership reduction, asset quality, and unsecured loan portfolios.
  • PAT (Profit After Tax) has been increasing, but the company's valuation is higher than its peers' due to a higher PB ratio (Price-to-Book Ratio).
  • The industry average PE (Price-to-Earnings) ratio is 23.2, while HDB Financial Services' PE ratio is 28.15.
  • The company plans to use the fresh issue proceeds of ₹2,500 crores to increase its tier-one capital base.
  • The remaining ₹10,000 crores will be used by HDFC Bank (the promoter) to sell its stake in HDB Financial Services.
  • Shareholders who want to apply through the shareholder quota must have held shares as on the record date and meet certain eligibility criteria.
  • Applications can be made in multiple categories, including retail, HNI, or shareholder quotas.

Source: CA Rachana Phadke Ranade via YouTube

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