HDB Financial aiming for $9–10 billion listing latest by March

HDFC Bank plans to list HDB Financial Services by December or the latest by the end of the current financial year.

HDFC Bank Ltd is moving ahead with plans to take its non-banking arm, HDB Financial Services, public, with a potential listing targeted for December or, at the latest, by the end of the current financial year, people familiar with the development said.

The initial public offering (IPO), likely a combination of secondary sale and fresh capital, is expected to fetch a valuation of roughly around $7–8 billion.

The bank, which holds a 94.64 percent stake in the non-banking finance company, is in the process of shortlisting bankers for the issue and may finalise the names this month. Among the foreign bankers, marquee names such as Morgan Stanley, Bank of America, Nomura and USB Securities have been shortlisted, while domestic firms such as ICICI Securities, Axis Capital and IIFL are expected to be roped in for the process, sources said.

“Draft offer document filings should happen in a month or so of appointing bankers,” a source said. “Work is on fast- track mode and as soon as the market regulator approves the filings, the company should be good to go to the market.”

Emails sent to HDFC Bank and HDB Financial Services for comments remained unanswered at the time of publishing the article.

Value unlocking

At a net worth of approximately Rs 13,300 crore as of June quarter, HDFC Bank is said to be seeking valuation of Rs 78,000–87,000 crore, which translates to $ 9–10 billion, for the subsidiary. In this range, the company may be seeking an estimated value of 4.5–5 x price to book. Sources said HDFC Bank may offload 10–15 percent through the issue, which may boost the bank’s capital adequacy by Rs 7,800 – 8,700 crore. As of June quarter, HDFC Bank’s capital adequacy ratio stood at 19.3 percent.

What is not clear at the moment is whether HDFC Bank will pursue a round of off-market sale of HDB Financial’s shares after talks with Mitsubishi UFJ Financial Group (MUFG) didn’t fructify.

“About two months ago, there was the plan to rope in a few investors for pre-IPO placements. But now with IPO timelines moved up and work for the same at full throttle, the management is keen to ensure that there is no delay in the process for the purpose of value discovery,” a banker aware of the developments told Moneycontrol on condition of anonymity.