HDB Financial Services IPO: GMP halves amid volatility; what Centrum, SBI Securities say

HDB Financial Services, which is set to launch its primary stake sale this week, is going through a rough ride in the grey market. The grey market premium (GMP) of HDFC Bank Ltd-promoted player has halved since the announcement of its price band. However, the issue has been able to attract positive reviews from the analysts so far.

The initial public offering (IPO) of HDB Financial Services is set to open for bidding on June 25, 2025, closing on June 27. The shadow lender is offering shares priced between Rs 700 and Rs 740, with a minimum application of 20 equity shares. The IPO's anchor book opens on June 24.

Talking first about the grey market activity, the issue is commanding a GMP of Rs 48-52 per share, suggesting a muted listing of 6-7 per cent for the investors over its upper end of the price band. However, the GMP stood around Rs 100-105 before the price band for the issue was announced.

Brokerage firms, including Centrum Broking and SBI Securities, are positive on HDB Financial Services IPO, citing its strong brand, AAA credit rating, diversified borrowing base, and growth potential. Analysts believe that while it trades at a discount to peers due to lower returns, its solid parentage, asset quality, and retail-focused model make it attractive.

On the liabilities side, HDB benefits from a strong, diversified borrowing base, backed by the highest domestic credit
ratings. The issue is valued at less than 3 times FY26E P/ABV, which is at a steep discount to larger peers such as Bajaj Finance and Chola, discounting relatively lower return ratios and growth, said Centrum Broking.

"The average ticket size stood at Rs1.65 lakh, with the portfolio mix comprising 73% secured and 27% unsecured loans. We recommend a 'subscribe' rating to the issue, supported by a robust brand franchise and granular retail lending model, a wide-reaching omni-channel (phygital) distribution platform, and access to low-cost funding anchored by a AAA-rated credit profile," it added.

The IPO aims to raise Rs 12,500 crore, including a fresh issue of Rs 2,500 crore and an offer-for-sale (OFS) of 13,51,35,135 shares worth Rs 10,000 crore by its parent HDFC Bank. Proceeds will bolster HDB Financial Services' tier-I capital base for future needs, including onward lending.

HDB Financial is valued at an FY25 P/B of 3.2 times/3.4 times at post issue capital at the lower price band and upper price band, respectively. The company is backed by strong parentage, brand, governance, risk management and a high credit rating, said SBI Securities in its IPO note.

"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. We recommend investors 'subscribe' to the issue at the cut-off price," it said.

Established in 2007 and headquartered in Ahmedabad, HDB Financial Services is a retail-focused non-banking financial company (NBFC), offering lending through enterprise, asset finance, and consumer finance verticals. It also provides BPO services to HDFC Bank and operates a large phygital distribution model across India.

For the six months ending September 30, 2024, HDB reported a net profit of Rs 1,172.70 crore on revenue of Rs 7,890.63 crore. For fiscal 2023-24, it recorded a net profit of Rs 2,460.84 crore with revenue of Rs 14,171.12 crore. The company anticipates a market capitalisation of Rs 61,400 crore post-listing.

Shares worth Rs 20 crore are reserved for employees, and shares worth Rs 1,250 crore are reserved for the shareholders of HDFC Bank. However, there is not discount for them. On net basis, allocation includes 50% for Qualified Institutional Bidders (QIBs), 15% for Non-Institutional Investors (NIIs), and 35% for retail investors.

The company's extensive branch network includes 1,772 branches across 31 states and union territories, focusing outside India's 20 largest cities, accounting for over 80% of its branches. This model supports its service offerings across diverse geographies.

JM Financial, BNP Paribas, Bofa Securities India, Goldman Sachs (India) Securities, HSBC Securities & Capital, IIFL Capital Services, Jefferies India, Morgan Stanley India Company, Motilal Oswal Investment Advisors, Nomura Financial Advisory and Securities (India), Nuvama Wealth Management, UBS Securities India are the book running lead managers of the HDB Financial IPO.