MUFG to Buy 20% Stake ($2B) in HDB Financial Services

Bloomberg’s Report on Mitsubishi UFJ Financial Group Inc (MUFG) investing $2 billion in HDB Financial Services Ltd has emerged. As per the reports by Moneycontrol, this investment will value HDB at an impressive $10 billion. MUFC is the world’s second-largest bank holding company. HDB is a non-banking lender and subsidiary of HDFC Bank Ltd in India. Currently, HDFC holds a 94.8% stake in its NBFC arm. The remaining stakes are with the employees of the company in the form of ESOP.

HDFC’s CFO, Srinivasan Vaidyanthan, has also hinted at the IPO of HDB Financial Services in the coming months. As under the regulatory guidelines, HDB needs to be listed by September 2025. The proposed MUFG investment will result in a 20% stake transfer to MUFG and will boost the company’s IPO ahead of its IPO.

What does this proposed deal indicate?

The proposed deal with MUFG in HDB Financial Services highlights the interest of international financial institutions in India’s growing non-bank lending sector. This deal also asserts the attractiveness of India’s NBFC sector. As per the initial reports by Economic Times, MUFG’s offered investments in HDB Financial services emphasize its interest in expanding its presence in India’s financial sectors.

The potential stake sale to MUFG will provide HDB with access to additional capital and resources required for its growth. Overall, this proposed deal indicates high confidence in India’s financial markets among global investors.

How did HDB Financial Services perform financially?

In FY23, the total revenue of HDB from operations stood at Rs. 12,403 crores. The Profit after Tax was at Rs. 1,959 crore. Its AUM has increased from Rs. 70,084 crores on March 31, 2023, to Rs. 83,989 crores on December 31, 2023. HDB’s Secured loans comprise 75.8% of the total portfolio. The company has also reduced its Non-performing assets to 2.25% due to which its profitability has increased. CRISIL’s rating of AAA indicates a strong presence of HDB in the retail finance space. The company also has a healthy capital position as reflected in its Tier-1 capital adequacy ratio and an overall CAR of 15.91%.

HDB’s Financial Services’ diverse product portfolio

With a strong footing in the non-bank lending sector, HDB Financial has established itself as a market leader in various loan segments. It has a diversified portfolio that caters to both retail and commercial clients.HDB standalone can maintain its strong position in the retail financial space. The three main categories of HDB include loans, fee-based products, and BPO services. BPO Services include collecting dues from borrowers.

Loans include consumer loans and enterprise loans. Consumer loans portfolio includes:

• Vehicle/auto loan
• Gold loan
• Personal loan
• Consumer durable loans for white products (washing machines and refrigerators), brown loans (TVs, household appliances), and digital products (mobile, computer, laptops).

Enterprise Loans include:

• Asset financing for SMEs.
• Fee-based products (general insurance products of HDFC)
• Secured and Unsecured loans

What are the growth prospects for HDB Financial Services?

HDB Financial Services (HDBFS) is India’s leading non-banking financial company. The parent company HDFC Bank is currently gearing up for the anticipated IPO of its subsidiary HDB Financial Services. For this bank has initiated discussions with leading investment banks to gauge interest and anticipate an increase in valuations. With MUFG’s proposed deal, there are deliberate efforts to secure a pre-IPO share placement. The proposal has also amplified the interest in HDB Financial Services unlisted share price among retail investors.

Interested in purchasing HDB Financial shares?

The notable increase in the valuation due to MUFG’s investment deal is a positive indicator of the HDF financial share price. With the consistent rise in the profit and reduction in the NPA, HDB Financial unlisted shares are an attractive proposition for investors. In April the HDB share price is trading at Rs. 1150.

Investing in both the pre-IPO shares is always a more feasible option. Profit is assured from both the unlisted shares over the long term, so now, all you are left to do is connect with Stockify ━ the best-unlisted shares broker in India. Our experts will help you choose the shares better suited to your goals

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