IPO-Bound HDB Financials Q3 Results: Profit Falls 26% As Provisions Rise

A rise in provisions led HDB Financial Services to report a 26% year-on-year fall in net profit for the quarter ended December to Rs 472 crore. Sequentially, the non-banking financial company's bottom line declined 20%.

Impairment on financial instruments for the company rose over twofold to Rs 636 crore. It was up nearly 50% sequentially, according to an exchange filing on Wednesday.

Higher levels of provisioning due to certain management overlays have led to a fall in profit after tax for the company, parent HDFC Bank's chief financial officer, Srinivasan Vaidyanathan, said in a post-earnings call.

For the quarter ended December, HDB Financials' loan book rose 22% YoY and 4% quarter-on-quarter to Rs 1.02 lakh crore

Gross Stage 3 assets of the bank were at 2.25%, unchanged from last year, but higher than 2.10% a quarter ago.

These weak results have come after HDB Financials filed its draft red herring prospectus with the Securities and Exchange Board of India in late October to raise up to Rs 12,500 crore through an initial public offer.

This is in line with the Reserve Bank of India's scale-based regulation framework, wherein upper-layer NBFCs have to list on the bourses by the end of September.

On the IPO, Vaidyanathan said a date had not been finalised, but the IPO process was under review. "As soon as we get the approval, we will be in a position to take the next step on that. I cannot give one particular time because there are various regulatory approvals to be received," he said.

The financial services company will offer equities with a face value of Rs 10 each worth Rs 2,500 crore as fresh issue. Promoter HDFC Bank will sell Rs 10,000-crore equities with a face value of Rs 10 each in the subsidiary.

HDFC Bank owns a 94.6% stake in HDB Financial Services. After fundraise from the primary market, HDB Financial Services will continue to be its subsidiary, the private lender said earlier in the month.