HDB Financial Services Ltd, a subsidiary of HDFC Bank, has given the green light to its much-anticipated initial public offering (IPO). The non-banking financial company (NBFC) is set to enter the public market with a significant offering that includes fresh equity and existing shares.
Key Details of the IPO
- Fresh Equity Issue: Rs 2,500 crore
- Additional Component: Offer for sale by current shareholders
- Expected Timeline: Launch by December 2024 or before the end of the financial year
- HDFC Bank’s Current Stake: 94.64%
Valuation and Stake Sale
HDFC Bank is eyeing a valuation between Rs 78,000 crore and Rs 87,000 crore for HDB Financial Services. This translates to:
- Price-to-Book Value: 4.5 to 5 times
- Potential Stake Sale: 10-15% of HDFC Bank’s holding
- Estimated Proceeds: Rs 7,800-8,700 crore
This move is expected to strengthen HDFC Bank’s capital position. As of June 2024, the bank’s capital adequacy ratio stood at 19.3%.
Banks Involved
Several prominent financial institutions are reportedly being considered to manage the IPO:
Foreign Banks:
- Morgan Stanley
- Bank of America
- Nomura
Domestic Firms:
- ICICI Securities
- Axis Capital
- IIFL
Regulatory Context
The IPO aligns with the Reserve Bank of India’s October 2022 directive, which requires “upper layer” NBFCs to list on stock exchanges. This move follows the successful listing of Bajaj Housing Finance, which recently saw its market capitalization exceed Rs 1.4 lakh crore.
As the financial sector watches closely, HDB Financial Services’ IPO is poised to be a significant event in India’s capital markets for the coming year.
