HDB Financial Services, HDFC Bank-owned non-banking financial company (NBFC), will raise Rs 15,000 crore via non-convertible debentures (NCDs) and Rs 500 crore through subordinated bonds to support expansion in the loan book.
HDB Finance, an NBFC in the retail financing space, has seen its overall loan portfolio grow by 22 per cent to Rs 56,287 crore as on June 30 from Rs 45,889 crore a year ago.
Its loan book has diversified, with an increased presence in commercial vehicle/construction equipment (CV/CE) financing and business loans. As a result, the share of loans against property (LAP) declined to 35 per cent as of June 2019, from 60 per cent in March 2016. Whereas, the share of CV/CE loans rose to 34 per cent from 21 per cent. Also, the share of business loans rose to 21 per cent from 15 per cent.
CRISIL has assigned the “AAA/Stable” rating to the Rs 500-crore perpetual bonds issue and the Rs 15,000-crore NCDs. The rating reflects the benefits that the NBFC derives from its majority owner HDFC Bank. The ratings are also underpinned by the company's established presence in the retail finance space, and its healthy capitalisation and earnings profile. HDB Finance is now expanding into consumer durable financing, digital products loans and other related segments. Apart from its traditional focus on the self-employed segment in non-metros, the company has now widened its reach to metro cities.With a diversified product offering and a pan-Indian presence, growth for HDB Finance is expected to be above the industry average over the medium term.
Its capitalisation remains healthy, as reflected in tier-1 capital adequacy ratio (CAR) of 12.5 per cent, and the overall CAR of 18.1 per cent as on June 30. Its net-worth expanded to around Rs 7,237 crore as on June 30, from Rs 7,178 crore as on March 31 this year.
CRISIL said HDB Finance’s overall asset quality remains adequate, but gross non-performing asset (NPA) has risen to 2.3 per cent as on June 30, compared to 1.78 per cent as on March 31. The increase in gross NPA was mainly on account of increased slippages in the asset financing book.
Asset quality in the micro, small and medium enterprises (MSME) segment and loans against property (LAP) would be a key monitorable.
This stems from the sensitivity of such borrowers to an environment of prolonged liquidity tightness.
Delinquencies in these loans are not high currently, owing to strong credit appraisal and risk-mitigating mechanisms. But if the liquidity situation does not stabilise, asset quality challenges could manifest, CRISIL said.