IPO-bound HDB Financial stock soars in unlisted market

Synopsis

HDB Financial Services, owned by HDFC Bank, is planning a ₹12,500 crore IPO, aiming to be the largest NBFC listing in India. While unlisted market shares surged to ₹1,200, experts predict a more realistic IPO price of ₹750-₹800. The listing is driven by RBI regulations requiring upper-layer NBFCs to go public.

Mumbai : As HDB Financial Services heads for its initial public offering (IPO), shares of the nonbank lender owned by the country’s most-valued bank in the unlisted market have seen a sharp rise — up to ₹1,200 apiece.

After the IPO plan was announced, the shares rose to a high of ₹1,400 apiece before settling at ₹1,200. However, brokers in the unlisted market say the euphoria is not justified as they expect the IPO to be priced around ₹750-₹800.

“HDB Financial has shown strength in the unlisted space in light of over-optimism and IPO announcements, but investors are being too bullish on the same by giving it a higher valuation as it belongs to HDFC group,” said Rahul Thalia, director of Sarffin Financial Advisors.

The prices in the unlisted markets went up to ₹1,450 from ₹850 to ₹900 levels in the last nine months. At this price, the stock is valued at a price-to-earnings ratio (P/E) of over 45 times versus an industry average of 28 times.

The book value per share for the fiscal year 2024 stood at ₹175 and for the half year of FY25 hovers around ₹187.

“At this metrics, we expect an IPO price of not over ₹750 ₹800 levels to make it look attractive for new investors,” said an investment banker who did not wish to be named.

Recently, HDFC Bank’s board approved a ₹12,500 crore IPO for HDB Financial, in which it owns a 94.5% stake. The lender will sell about ₹10,000 crore worth of stakes, while the NBFC will issue fresh equity shares worth ₹2,500 crore in the IPO. When launched, this will be marked as the largest IPO by an NBFC in India to date.

The listing is to comply with the requirements of the Reserve Bank of India (RBI). HDB is in the upper layer of NBFCs, the highest cate gory, which means it needs to be listed by September 2025 under regulatory guidelines.

Meanwhile, for the quarter ended September 30, HDB posted net revenue of ₹2,410 crore. The profit after tax was ₹590 crore compared with ₹600 crore in the September 2023 quarter. The total loan book was ₹98,600 crore. Stage 3 loans were at 2.10% of gross loans.

HDB primarily focuses on vehicle and personal loans and loans against property. The NBFC also plans to open nearly 200 new branches this fiscal year to add to the 1,600 it has to expand its loan book.

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