HDB Fin Services to raise ~2.5K cr via debt capital
After the pandemic shock, the company has improved its risk profile
HDB Financial Services, a subsidiary of HDFC Bank, is planning to raise about ~2,500 crore of debt capital to support business growth. The subordinated debt is to the tune of ~2,000 crore while perpetual debt is nearly ~500 crore. After witnessing asset quality pressures in the aftermath of the Covid-19 pandemic, the finance company has improved its risk profile and health to support sustained growth in loan book.
Rating agency CRISIL has assigned a “AAA” rating to both instruments. The rating reflects an established presence in the retail finance space, its healthy capitalisation, and expectation of continued support from its parent and majority owner HDFC Bank, CRISIL said.
The non-banking finance company’s gross stage III, also known as bad loans assets, reduced to 2.25 per cent in December 2023 from 2.73 per cent in March 2023 and 4.99 per cent in March 31, 2022. The reduction was supported by write-offs and lower slippages. The company has maintained stage III provision cover of 68 per cent as of December 31, 2023. The unit of HDFC Bank is one of the larger players in the retail financing space. Its asset under management (AUM) rose to ~83,989 crore as of December 31, 2023, from ~70,084 crore as of March 31, 2023 and ~61,444 crore as of March 31, 2022.
Its capitalisation remains healthy, as reflected in overall capital adequacy of 17.99 per cent as on December 31, 2023. Reported net worth stood at ~11,952 crore as of December 31, 2023, against ~11,437 crore as of March 31, 2023.
The cushion for asset side risks was adequate, as reflected in net worth coverage for net non-performing assets (NPAS) at around 20 times as of December 31, 2023, CRISIL said. The company reported a net profit of ~1,805 crore on a total income of ~7,017 crore for the nine months ended in the current financial year.