HDB Financial IPO subscribed 17x on strong institutional demand

HDB Financial's ₹12,500 crore IPO sees overwhelming interest from institutional investors, though modest grey market premium kept retail demand relatively low

Despite a slow start, HDB Financial Services' mega public offering proved to be a blockbuster one, attracting bids worth ₹1.6 trillion. 

 

The initial public offering (IPO) saw nearly 17 times (x) more demand than shares on offer. Most of the bids came from institutional investors, with the portion served for them witnessing 55x subscription.  

Demand from other categories of investors were relatively subdued. The high networth individual (HNI) portion of the issue was subscribed 10 times and the retail investor portion garnered just 1.41 times subscription. 

The portion reserved for employees and HDFC Bank shareholders was subscribed 5.7 times and 4.3 times, respectively. The subdued demand from individual investors was on account of modest grey market premium. Shares of HDB Financials were changing hands at less than 8 per cent premium in the unofficial grey market. The stro­ng demand from institutional investors was on account of HDFC’s strong brand pedigree even as concerns remained over HDB Financial’s IPO pricing and a key regulatory overhang. 

HDB's ₹12,500 crore IPO has been priced between ₹700 and ₹740 per share. At the top end, HDB is valued at ₹61,388 crore on a post-dilution basis — about 3.4 times its book value.  

“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 2nd largest customer franchise. The company is well placed to register healthy growth going ahead, while witnessing an improvement in the asset quality,” said a note by SBI Securities.  

Ahead of the IPO, NBFC major had allotted shares worth ₹3,369 crore to anchor investors. Life Insurance Corporation, ICICI Prudential Mutual Fund, Nippon Life, and Goldman Sachs Funds were among those applied in the anchor category. The IPO comprises a fresh issue of ₹2,500 crore and an offer for sale of ₹10,000 crore.  

Following the IPO, parent HDFC Bank's stake will drop from 94.32 per cent to 74.2 per cent. A proposal mooted by the Reserve Bank of India, if approved, would require HDFC Bank to reduce its stake to 20 per cent.