HDB Financial Services, a subsidiary of HDFC Bank, will open its initial public offering (IPO) for subscription from June 25 to June 27, 2025.

The price band has been set at 700–740 rupees (US$8.38-8.86) per share for the 12,500 crore rupees (US$1.5 billion) public issue, which includes 10,000 crore rupees (US$1.15 billion) offer for sale by HDFC Bank and a fresh issue of 2,500 crore rupees (US$289 million).

The IPO will reserve equity shares worth up to 1,250 crore rupees (US$144.4 million) for existing shareholders.

At the upper price band, the IPO could lead to a market capitalization of around 58,889 crore rupees (US$6.8 billion) for the non-banking financial company.

HDFC Bank, which currently holds a 94.6% stake in HDB Financial Services, is expected to reduce its shareholding after listing to comply with regulatory requirements.

The anchor book for the IPO will open on June 24, and the basis of allotment is expected to be finalized by June 30.  This IPO is set to be the largest public offering in 2025 and the biggest since Hyundai Motor India’s 27,000 crore rupees (US$3.12 billion) issue in 2024.

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🔗 Source: The Economic Times

🧠 Food for thought

1️⃣ NBFC valuations reflect market caution despite growth prospects

HDB Financial’s IPO price band of ₹700-740 represents a substantial 42% discount to its valuation in the unlisted market, signaling a conservative pricing approach despite the company’s strong fundamentals 1.

This pricing strategy comes amid a broader IPO market that began 2025 with its slowest start in five years, though recent activity suggests a potential rebound 2.

The modest grey market premium of ₹74 (10%) further indicates measured investor expectations, contrasting with the company’s historical growth trajectory of over 30% CAGR in its asset portfolio 3.

This conservative valuation appears strategic in the current market environment, where investors have become increasingly selective following recent regulatory changes, including the RBI’s cap on IPO funding by NBFCs at ₹1 crore per borrower 4.

The pricing also aligns with established valuations for listed NBFCs, suggesting HDFC Bank is prioritizing a successful listing over maximizing short-term gains 1.

2️⃣ Strategic divestment supports HDFC Bank’s capital optimization

HDFC Bank’s decision to divest a significant portion of its 94.6% stake through a ₹10,000 crore offer for sale represents a calculated move to optimize its capital structure while meeting regulatory requirements 5.

The bank has invested ₹3,480 crore in HDB Financial to support its expansion since inception in 2007, and this partial exit should generate substantial returns on that investment 3.

Analysts have previously indicated that unlocking HDB Financial’s value through an IPO could potentially increase HDFC Bank’s stock price by approximately 17%, based on conservative valuations 3.

This strategic move follows HDFC Bank’s established pattern of successfully listing group companies, maintaining its market leadership position 6.

The timing aligns with HDB Financial’s maturation into a substantial entity with ₹986.2 billion in gross loans and operations across 1,772 branches serving 17.5 million customers 7.

3️⃣ HDB Financial’s positioning in India’s evolving credit landscape

HDB Financial’s focus on underserved borrowers positions it strategically in India’s expanding retail credit market, which is projected to grow at a CAGR of 15-17% through FY27 7.

The company’s risk management approach is evidenced by its highly diversified loan book, where the top 20 borrowers account for less than 0.36% of total loans, creating a resilient portfolio structure 8.

HDB’s comprehensive product range spanning personal loans, vehicle financing, and business loans has enabled it to build a balanced growth trajectory, with its assets under management rising by 25% to ₹55,425 crore in fiscal 2019 5.

The company’s digital transformation initiatives, including automated underwriting and AI-driven risk modeling, enhance its operational efficiency in serving the underbanked segments of the population 7.

As the largest NBFC IPO since Hyundai’s offering, HDB Financial’s market debut represents a significant milestone for India’s non-banking financial sector, potentially influencing investor sentiment toward similar offerings in the pipeline 8.

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