8 hours ago
The initial public offering (IPO) of HDB Financial Services will kick off for subscription on Wednesday, June 25. The company is planning to raise about ₹12,500 crore through the IPO, which will conclude on June 27.
Funds raised from the IPO will be used for augmentation of its Tier-1 capital base to meet the company's future capital requirements including onward lending.
Should investors subscribe to the IPO?
SBI Securities
: Subscribe
While recommending a subscribe rating to the issue at the cut-off price, SBI Securities said the company is backed by strong parentage, brand, governance, risk management and a high credit rating. It is one of the largest NBFCs catering to the second largest customer franchise. The company is well placed to register healthy growth going ahead, while witnessing an improvement in the asset quality .
Arihant Capital: Subscribe for long-term
The brokerage wrote in its note that the company is strategically positioned to benefit from India's massive credit expansion opportunity, with systemic credit projected to grow at 13-15% CAGR to reach Rs 297 lakh crore by FY28.
At the upper end of the price band, the issue is valued at a price-to-book value (P/BV) ratio of 3.87x, based on a BV of Rs 191 per share, it said with a 'Subscribe for long-term' rating for this IPO.
Centrum Broking: Subscribe
The broking firm has recommended a subscribe rating to the issue, supported by a robust brand franchise and granular retail lending model, a wide-reaching omni-channel distribution platform, and access to low-cost funding anchored by a AAA-rated credit profile.
How HDB Financial stacks up against listed peers
At the IPO price of ₹740 per share, HDB Financial is valued at under 3x its FY26E P/ABV, which is at a steep discount, compared to larger peers such as Bajaj Finance and Cholamandalam.
For FY25, HDB reported a Return on Assets (ROA) of 2.2% and Return on Equity (ROE) of 14.7%, trailing peers such as Bajaj Finance and Chola, which posted stronger profitability.
On the asset quality front, HDB’s GNPA and NNPA levels are better than Shriram and L&T Finance, though still higher than Bajaj Finance.
In terms of scale, HDB's AUM is smaller than Bajaj, Shriram, or Chola, suggesting room for faster growth from a lower base.
Key details about HDB Financial IPO
Price band: ₹700-740
GMP: % over the issue price
Lot size: 20 shares
The IPO is a combination of a fresh issue of ₹2,500 crore and an offer for sale of ₹10,000 crore from HDFC Bank, which holds a 94.3% stake.
Nearly 50% of the offer will be allocated to qualified institutional buyers, 15% to non-institutional bidders, and the remaining 35% to retail investors.
The company is targeting a post-money valuation of around $7.2 billion (around Rs 62,000 crore) at the higher end of the price band.
HDB Financial's listing is a regulatory requirement, as HDB Financial Services falls under the "Upper Layer" category of Non-Banking Financial Companies (NBFCs) pursuant to the Reserve Bank of India’s (RBI) October 2022 circular.
HDB Financial operates through 1,680 branches and has a diversified asset under management (AUM) mix, with a strong focus on retail and SME lending. Its largest loan segments include vehicle finance and loans against property.
JM Financial, BNP Paribas, Bofa Securities India, Goldman Sachs (India) Securities, HSBC Securities & Capital Markets, IIFL Capital Services, Jefferies India, Morgan Stanley India Company, Motilal Oswal Investment Advisors, Nomura Financial Advisory And Securities (India), Nuvama Wealth Management, UBS Securities India are the book running lead managers of the HDB Financial IPO, while MUFG Intime India (Link Intime) is the registrar for the issue.
The allotment for the HDB Financial IPO is expected to be finalised by June 30, and the shares will be listed on BSE, NSE with a tentative listing date fixed as July 2.
Shares of HDFC Bank, the parent company and the country's largest private lender, ended little changed on Tuesday at ₹1,963.70 apiece.
