HDB Financial May Be Cheaper Than Bajaj Fin, But What About Returns?
The recent IPO of HDB Financial Services, a subsidiary of HDFC Bank, has raised one key question among retail and institutional investors: Is HDB Financial a cheaper yet high-potential alternative to Bajaj Finance?
On the surface, HDB appears attractively priced. But does a lower valuation translate to better long-term returns? Let’s analyze.
1. Valuation Metrics: The Price Advantage
HDB Financial debuted on the stock exchange with:
Price-to-Earnings (P/E) ratio: ~28x
Price-to-Book (P/B) ratio: ~3.5x
Compare that with Bajaj Finance, which trades at:
P/E: ~40x
P/B: ~7x
Verdict: On valuation, HDB clearly looks cheaper. But valuation is just one part of the story.
2. Growth Potential: A Mixed Picture
Bajaj Finance has demonstrated:
Compounded profit growth of over 25% CAGR over 5 years
Dominance in consumer lending and cross-selling via digital platforms
A robust digital transformation and ecosystem approach
HDB Financial, by contrast:
Focuses more on SME lending, used vehicle finance, and gold loans
Has a broader retail + enterprise blend, but less digitized
Needs to catch up on tech and scale compared to Bajaj
Verdict: Bajaj Finance is a proven growth engine. HDB has room to grow, but execution will be key.
3. Asset Quality and Risk
HDB Financial’s GNPA (Gross Non-Performing Assets): ~2.1–2.5%
Bajaj Finance’s GNPA: ~1.1%
Bajaj’s focus on salaried borrowers and digital underwriting gives it better credit quality metrics.
Verdict: Bajaj Finance remains more efficient and less risky, though HDB is improving its underwriting models.
4. Return on Equity (RoE)
Bajaj Finance: ~22–24% RoE
HDB Financial: ~14–15% RoE (post-listing estimates)
While HDB is backed by HDFC Bank, it has yet to match Bajaj’s return metrics.
5. Parentage and Market Perception
Bajaj Finance has carved an independent brand with strong recall.
HDB Financial still leans on HDFC Bank’s brand equity.
Institutional investors trust HDFC’s pedigree, but Bajaj’s agility and market reputation are unmatched in the NBFC space.
6. Listing Pop Doesn’t Guarantee Long-Term Outperformance
HDB Financial’s IPO listed with a 13% premium, while Bajaj Finance has delivered multibagger returns over the past decade. A good IPO debut doesn’t guarantee sustained returns—fundamentals do.
Conclusion: Should You Choose HDB Over Bajaj Finance?
If you are a value investor looking for an entry into India’s NBFC space at a lower valuation, HDB Financial could offer medium- to long-term upside—especially as it expands tech and improves return ratios.
However, if you’re looking for consistent compounding, proven scalability, and a more mature business model, Bajaj Finance remains the stronger play.
❓ FAQs
1. Is HDB Financial cheaper than Bajaj Finance?
Yes, in terms of valuation ratios like P/E and P/B, HDB Financial is currently more affordable.
2. Does a lower valuation mean higher returns?
Not necessarily. While a lower valuation can signal opportunity, return depends on earnings growth, execution, and market confidence.
3. Which company has better asset quality?
Bajaj Finance has superior asset quality with lower NPAs and better credit underwriting efficiency.
4. Is HDB Financial a safe investment?
It’s backed by HDFC Bank and shows stable fundamentals, but investors should monitor its credit growth strategy and digital transformation.
5. Which is better for long-term investment: HDB or Bajaj Fin?
Bajaj Finance is more established and reliable for long-term returns. HDB Financial offers potential but is more suited for those with a moderate risk appetite.
Published on: July 02, 2025
Uploaded by: Pankaj
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed