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Summary: A blockbuster IPO, a trusted parent and a strong listing often feel like the perfect combination. But what happens after the excitement fades? This story looks at why one of the year's biggest listings struggled to reward investors and what they may have overlooked from the start.
A year ago, HDB Financial looked like one of the safest IPO bets in the market. It carried the HDFC name, raised Rs 12,500 crore in one of the year's biggest issues, and drew heavy demand. It listed at a premium and rewarded allottees at once.
The excitement did not last. Rs 1 lakh of shares sold on listing day booked a gain of nearly 14 per cent. Held for a year instead, that Rs 1 lakh is worth about Rs 93,700, a loss of over 6 per cent including the Rs 4-a-share dividend. Those who bought at the listing-day close of Rs 841, the path most retail money took, are down to about Rs 82,500, off roughly 18 per cent. A Nifty 50 index fund would be worth about Rs 95,500.
The question is why, and the answer has less to do with the IPO than with what came after.
The listing was not really about growth
One detail got lost in the frenzy: HDB was not listing because it needed capital. The Reserve Bank's scale-based rules require large upper-layer NBFCs to list within three years of being classified as such. HDB made that list in September 2022, setting a September 2025 deadline; it filed its draft prospectus in October 2024.
The issue structure gives it away. Of the Rs 12,500 crore raised, only Rs 2,500 crore was fresh capital for the company; the other Rs 10,000 crore was an offer for sale by parent HDFC Bank. Four of every five rupees went to the parent, not the business. The fresh money did strengthen the balance sheet, lifting Tier-1 capital from 14.7 to 17.3 per cent and overall capital adequacy from 19.2 to 21.8 per cent. But an investor expecting a business transformed by IPO proceeds was looking in the wrong place.
The parent did not use the moment to exit further. HDFC Bank held 74.2 per cent at listing, took its exit through that Rs 10,000 crore, and has not sold a share since. Ownership at the other end is lopsided: of HDB's 9.6 lakh shareholders, 98.8 per cent hold 500 shares or fewer, while just 805 control 93 per cent of the company.
Set against its own vintage, the first year looks ordinary. HDB was one of 108 IPOs in India in 2025, and from its listing-day close it has beaten only 36 of them. Nearly half the class still trades below its issue price. Once the frenzy faded, HDB had to earn its valuation the hard way.
A diversified lender, not a niche player
HDB is a non-banking financial company: it lends like a bank but cannot take deposits. Set up in 2007 as an HDFC Bank subsidiary, it uses that parentage for reach into towns a bank branch might not cover. The name priced the IPO; since then the market has judged HDB on its own numbers.
The book splits three ways: enterprise lending, small-business and property-backed loans, at 38 per cent; asset finance, vehicles and equipment, also 38 per cent; and consumer finance, personal, gold and two-wheeler loans, the rest. Unlike a single-product specialist such as gold-loan lender Muthoot, HDB's edge is scale: 2.3 crore customers, 1,730 branches and over 1.4 lakh touchpoints. That scale also means its fortunes track the broader credit cycle rather than any one tailwind.
Why the stock actually fell
The stock fell as much as 33 per cent below its listing price at one point, after two quarters of rising credit stress, before clawing back some ground.
Gross NPA is the share of loans overdue more than 90 days. Credit cost is the money set aside for loans a lender expects to lose; the higher it runs, the more of a quarter's profit disappears before it reaches shareholders. Both climbed through the first half of FY26.
Stress built, then erased
Gross NPA and credit cost both peaked in the September quarter, and both were back to March-2025 levels a year later
| Metric | Mar-25 | Jun-25 | Sep-25 | Dec-25 | Mar-26 | Jun-26 |
|---|---|---|---|---|---|---|
| Gross NPA (%) | 2.3 | 2.6 | 2.8 | 2.8 | 2.4 | 2.3 |
| Net NPA (%) | 1 | 1.1 | 1.3 | 1.3 | 1.1 | 1 |
| Credit Cost Ratio (%) | 2.4 | 2.5 | 2.7 | 2.5 | 2.4 | 2.3 |
| Disbursements (Rs Cr) | 17,643 | 15,171 | 15,599 | 17,917 | 19,922 | 17,629 |
The damage traced to floods that idled vehicles in the North and East, exposing a real weakness. HDB's commercial-vehicle book leans on small, single-truck operators with no cash cushion, unlike peers such as Shriram Finance that fund larger fleets. A truck that cannot run means a borrower who cannot repay. Another 26 per cent of the book, unsecured loans, was still working through stress that predated the listing. The numbers turned in March, and the June quarter was HDB's best yet: record profit after tax of Rs 785 crore, up 38 per cent, disbursements up 16 per cent year on year. The stock has not followed.
Loan book grows, earnings lag
Zoom out to four years and the shape changes. The loan book compounded at 19.2 per cent a year between FY23 and FY26, operating profit before provisions nearly kept pace at 16.1 per cent, but profit after tax grew just 9 per cent, because credit cost widened steadily across the whole stretch, not only in FY26.
Growth the book has, returns it does not
The loan book compounded at 19.2 per cent a year, but profit grew 9 per cent and return on AUM slid from 2.8 to 2.1 per cent
| Financial metric | FY23 | FY24 | FY25 | FY26 | CAGR FY23-FY26 (%) |
|---|---|---|---|---|---|
| Loan book (Rs cr) | 70,084 | 90,235 | 107,262 | 1,18,733 | 19.2 |
| Operating profit before provisioning (Rs cr) | 3,958 | 4,372 | 5,041 | 6,201 | 16.1 |
| Profit after tax (Rs cr) | 1,959 | 2,461 | 2,176 | 2,544 | 9 |
| Return on AUM (%) | 2.8 | 2.7 | 2 | 2.1 | - |
| Net interest margin (%) | 8.3 | 7.9 | 7.6 | 8 | - |
| NPA is a non-performing asset. | |||||
Net interest margin recovered to 8 per cent by FY26, so the lending engine is not the problem. What is missing is proof that scale makes the cost structure cheaper to run. We use return on AUM rather than return on equity here, since fresh IPO capital would inflate the equity base and understate how the lending business performed. On that measure, HDB earned 2.8 per cent in FY23, sliding to 2.1 per cent in FY26.
Growth, not cheap, and still a cycle bet
At roughly three times book value against a return on equity under 14 per cent, the market is paying for a lender growing its book at nearly 20 per cent a year, a rate few large NBFCs match at this scale, while discounting it for cyclical segments. HDB is priced between a growth story and just another lender.
Against peers, that pricing looks fair, not generous. HDB's FY26 return on AUM of 2.1 per cent trails Bajaj Finance's 4.3 per cent and Cholamandalam's 2.5 per cent, both trading near or above five times book. HDB is well clear of the weak, undercapitalised lenders, but has not yet earned its way into the league that commands a premium multiple. That entry ticket is consistently lower credit costs across a full cycle, not the market simply deciding to pay more for the same business.
Our verdict after year one
HDB looks better capitalised and steadier than its post-IPO slide suggested. The structural advantages, funding credibility, a diversified book, deep reach, hold up. But FY26 showed they do not automatically protect returns once underwriting meets borrowers with thin cash buffers.
HDB deserves a better label than a generic cyclical lender, but not yet that of a premium compounding NBFC. The next phase is not about growing the book; it is about turning that growth into better through-cycle returns without relapsing into higher credit costs the next time a stress season tests it. Clear that test and the market has reason to start paying up. Miss it again and HDB stays what it looks like today: a decent, well-funded lender whose parentage lowers the downside but has not yet earned it the upside.
Before the next big issue tempts you, ask three things: why the company is listing at all, where the money it raises actually goes and what kind of business you are buying.
The biggest IPOs often come with the biggest narratives. The harder question is whether the business, its valuation and the reasons for listing actually justify your money. Value Research Stock Advisor looks beyond the excitement to identify businesses worth owning, the prices that make sense and the moments when it's better to wait than chase.
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