HDFC's subsidiary HDB to raise $150 mn from IFC in senior debt investment

HDB Financial Services Limited (HDB), a subsidiary of HDFC Bank Limited, is set to raise $150 million from International Finance Corporation (IFC).  The investment will be in the form of senior debt investment, said the World Bank's investment arm.

IFC’s loan to the financial institution described in this SII is targeted for on-lending for MSMEs.       

The proposed investment comprises senior debt investment in HDB, which is a non-banking finance company(NBFC) providing financing to micro-small and medium enterprises (MSMEs) across India and is a subsidiary of HDFC Bank Limited, India’s largest private sector bank. HDB operates through a pan-India (22 states and 4 union territories) distribution network of more than 1,160 branches across 831 cities and offers a range of loan products, both secured and unsecured.

This investment will help in expanding the outreach of access to microfinance to the lower end of MSMEs who have little or no access to formal sources of financing.

HDB intends to grow its portfolio at an average CAGR of 30-35 per cent over the next five years as well as grow its current customer base at a similar growth rate. 

HDB was incorporated as a subsidiary of HDFC Bank, which currently holds 95.87 per cent shareholding in HDB, with the residual 4.13 per cent being held by the management and key personnel associated with HDFC Bank.          

As of  March 31, 2018, HDB has an asset base of Rs 447,539 million (US$6.9 billion) and a loan portfolio of Rs 435,727 million (US$6.7 billion). HDB’s primary focus is on borrowers whose credit requirements are less than $10,000.

The proposed IFC debt facility will enable HDB to expand its individual micro & small business loan portfolio in the low-income states (LIS) of India.

IFC's debt investment will help the Company diversify sources of funding by providing comfort to potential lenders and investors. 

An investment by IFC will be amongst the first investments by a large, international institutional investor in the Company, said IFC.