 "HDB Financial")
The steep pricing cut in the initial public offering (IPO) of HDB Financial Services came after feedback from high-quality institutional investors -- including mutual funds, insurance companies, and leading foreign portfolio investors (FPIs) — following extensive roadshows, according to the company’s management and investment bankers involved in the offer.
The IPO, which opens on June 25 and closes on June 27, has kept a price band of ₹700–740 per share, significantly below levels at which the lender’s shares were trading in the unlisted market. Anchor investors can subscribe on June 24.
HDFC Bank, which promotes HDB, may be required to reduce its stake to below 20 per cent if a draft circular issued by the Reserve Bank of India (RBI) is implemented. The proposed rule seeks to prevent overlapping lending activity between banks and their group entities.
Investment bankers said pricing in the unlisted space is without any input from the management. “How the particular share trades in the unlisted market actually has no dimension of any engagement of a company, the management or the dealers,” said Sonia Dasgupta, managing director and CEO of the investment banking division at JM Financial, one of the lead bookrunners for the IPO. “We have looked at it (the pricing) like any other IPO and evaluated what would be the right pricing for us to engage with investors.”
In its red herring prospectus, HDB noted that HDFC Bank may need to significantly reduce its ownership in the company, potentially below 20 per cent, if the RBI’s October 4, 2024, draft circular is adopted as is. The company said such a requirement could have a material adverse effect on its business operations, financial position, and share price.
“There were discussions with investors around it (the RBI circular). The management was able to address these,” said Jiji Jacob, head-equity capital markets at Jefferies India. “We have a great set of anchor books that will be published on Tuesday. There are not just mutual funds and insurance companies, but top-quartile FIIs who have got comfort around how to kind of model that as the company gets listed.”
Jacob said the price was determined after extensive roadshows with institutional investors. “Whatever is happening in the unlisted market is without the management explaining the business or helping investors understand its nuances. So, as management and as bankers, we have no influence over what happens in the unlisted space,” he said. “The IPO price discovery is far more scientific and is based on inputs received from high-quality investors.”
At the upper end of the price band, HDB Financial will be valued at over ₹61,000 crore, placing it among the top 10 listed pure-play private-sector finance companies in India. The₹12,500-crore IPO comprises an offer for sale worth ₹10,000 crore and a fresh issue of ₹2,000 crore. HDFC Bank currently holds a 94.04 per cent stake in HDB, which will drop to 75 per cent after the issue.
The offering will be the second-largest IPO in the past three years and the fifth-largest ever, following Hyundai India, Life Insurance Corporation of India (LIC), Paytm, and Coal India. It is also the first public float from the HDFC group in seven years, the last being HDFC Life Insurance.
According to Arijit Basu, chairman of HDB Financial, the RBI’s ‘Forms of Business’ circular is directed at banks, not their subsidiaries. In this case, HDB is a subsidiary and is not directly impacted by the circular, he said, adding, it is the parent bank that is affected.
The net proceeds from the IPO will be used to strengthen HDB’s tier-I capital base and support future lending.
HDB is a diversified, upper-layer non-bank financial company (NBFC) offering loans through three key verticals: Enterprise lending, asset finance, and consumer finance. As of March 31, 2025, secured loans accounted for 73 per cent of the total loan book, with unsecured loans comprising 27 per cent. In FY25, the company reported a net profit of ₹2,180 crore on a total loan book of ₹1.06 trillion. Stage 3 loans stood at 2.26 per cent of gross loans.
Ramesh G, managing director and CEO, HDB Financial Services, said the business -- spanning enterprise loans, consumer loans, and asset finance -- has been built from the ground up since 2008 and operates independently of HDFC Bank, with no sourcing from the parent and a separate technology stack.
The IPO is also expected to generate substantial payouts for senior staff holding employee stock options. At the upper price band, Ramesh’s stake is worth ₹63 crore. Chief Credit Officer Rohit Patwardhan and Chief Business Officer Sarabjeet Singh hold shares worth ₹32 crore and ₹25 crore, respectively. Nearly a dozen other employees hold shares valued between ₹1 crore and ₹32 crore.
