
Unlisted shares of HDB Financial Services, the non-banking arm of HDFC Bank Ltd, has seen a sudden spurt lately as the company received SEBI's nod to launch its primary offering. Rising in tandem with unlisted shares of NSE, shares of HDB Financial Services have risen over 55 per cent to Rs 1,200-1,250 levels from Rs 850-900 a couple of weeks earlier.
HDB Financial Services has received the approval from capital markets regulator SEBI to raise Rs 12,500 crore through an IPO. The parent entity, HDFC Bank, owns 94.6 per cent stake in the shadow lender, shall sell shares worth Rs 10,000 via offer-for-sale (OFS) route in this stake sale. Remaining portion of Rs 2,500 crore shall constitute the issue of fresh equity shares.
Sandip Ginodia, CEO of Kolkata-based Altius Investech said that the company has been doing reasonably decently lately but an IPO is unlikely to come at these levels. The strong parentage of HDFC Group is adding to the optimism for the company but it appears to be fully priced in at current levels.
For the financial year ended on March 31, 2025, HDB Financial Services reported a 24 per cent year-on-year (YOY) jump in its interest income at Rs 13,836 crore, with PAT dropping 11.5 per cent YoY to Rs 2,176 crore. Its gross and net NPAs also increased to 2.26 per cent for the reported period.
The IPO approval has triggered the buying interest in HDB Financial Services. The stock has seen a sharp upmove recently as investors are rushing to pre-IPO market ahead of the IPO. Similar frenzy was seen in the case of Waaree Energies, Swiggy and Tata Technologies, said Hitesh Dharawat of Mumbai-based boutique firm Dharawat Securities.
HDB Financial Services currently has a total market capitalization close to Rs 1 lakh crore. Its price to equity (P/E) ratio stood at 46.5 times, while price-to-book (P/B) ratio is at 6.4 times, as per current valuations. The company has a return-to-equity (RoE) of 13.75 per cent.
"Companies with strong parentage command a premium in the unlisted market. HDB Financial Services is no exception. However, the current valuations are a bit stretched," he adds. "Ahead of IPO, demand is usually high in the unlisted market, which limits the supply and leads to a sudden spurt in stock prices of IPO-bound companies."
According to the dealers from the pre-IPO market, HDB Financial Services may launch its IPO in the Rs 750-900 range. A note from Macquarie Capital in January 2025 said that HDB Financial Services is quoting high valuations in the unlisted markets, while peers, despite delivering higher ROEs and growth, trade at lower multiples.