India’s Second Biggest IPO in 3 Years: HDB Financial Hits the Market

HDB Financial Services launches a ₹12,500 crore IPO with a price band of ₹700–740 amid regulatory uncertainty. The offering includes a major stake sale by HDFC Bank and is set to open for public subscription from June 25 to 27.

HDB Financial Services, a significant subsidiary of HDFC Bank, has initiated an initial public offering (IPO) valued at ₹12,500 crore, which represents one of the largest fundraising efforts in recent years. The IPO opened on June 20, against a backdrop of regulatory uncertainty affecting the non-banking financial company (NBFC) sector as a whole. 

Key Highlights of the IPO: 

• Price Band and Valuation: 

The shares are priced within the range of ₹700 to ₹740 each, which reflects a considerable 66% discount compared to market expectations. This pricing strategy is viewed as a prudent approach, given the current regulatory landscape.

• Offer Composition:

The offering is composed of a fresh capital raise amounting to ₹2,500 crore, alongside an offer for sale (OFS) of ₹10,000 crore by HDFC Bank. As a result of this IPO, the bank's stake in HDB Financial will be reduced from 95% to 75%.

• Listing Deadline: 

In accordance with guidelines from the Reserve Bank of India (RBI) for large NBFCs, HDB Financial is required to complete its listing by September 2025. This requirement has influenced the timing of the offering.

• Regulatory Overhang: 

A recent proposal by the RBI indicates that banks should not hold majority stakes in subsidiaries with overlapping business operations. Should this proposal be implemented, HDFC Bank may need to further reduce its stake in HDB to 20%.

• Company’s Response: 

Arijit Basu, Non-Executive Chairman, has stated that the RBI’s proposals do not impact HDB directly and emphasized the bank's responsibility to comply with regulatory requirements.

• Investor Sentiment and Pricing Strategy: 

Bankers have acknowledged that the existing regulatory uncertainty has had an influence on the IPO pricing. Nonetheless, they report strong demand observed during pre-IPO roadshows, with considerable interest from mutual funds, insurance companies, and foreign institutional investors.

• Anchor Allotment and Subscription Details: 

The IPO, with a face value of ₹10 per share and bid lots set at 20 shares, is scheduled for public subscription from June 25 to June 27. The announcement of anchor allotments is anticipated by Tuesday.

• Future Outlook: 

Following the listing, the management intends to enhance asset quality and further strengthen its loan portfolio across enterprise, consumer, and asset finance sectors.

This public offering is the second-largest IPO in India in the past three years, following Hyundai’s ₹27,000 crore listing. With significant companies such as Tata Capital, LG, PhonePe, and Lenskart also in preparation for their own public offerings, the forthcoming months are expected to witness a wave of high-profile listings. For HDB Financial, this IPO not only serves to fulfill a regulatory obligation but also represents a pivotal milestone in its development as an independent, publicly-traded financial services organization.