HDB Financial IPO: 10 key things to know as HDFC Bank's NBFC arm prepares for stock market debut

At present, HDFC Bank holds 94.36 per cent stake in HDB Financial Services, a non-banking financial company (NBFC) arm of the bank.

HDB Financial Services, a subsidiary of HDFC Bank, has filed preliminary papers with the Securities and Exchange Board of India (SEBI) for its initial public offering (IPO).

The proposed IPO will be a combination of a fresh issue of equity shares and an Offer-for-Sale (OFS). Here are key details you need to know ahead of issue opening for public subscription:

1) HDB Financial serves the retail and commercial segments, offering a wide range of products such as personal loans, vehicle loans, and loans against property.

2) Subsidiary of HDFC Bank: HDB Financial Services is a non-banking financial company (NBFC) arm of the largest private sector lender in India, HDFC Bank.

3) Issue size: The company plans to raise Rs 12,500 crore in the primary market.

4) Issue Objective: Proceeds from the fresh issue will be used to strengthen the company's Tier-I capital base to support future capital needs.

5) Issue type - The issue is a combination of a fresh issue of equity shares worth Rs 2,500 crore and an Offer-for-Sale (OFS) of Rs 10,000 crore by promoter HDFC Bank. At present, HDFC Bank holds 94.36 percent stake in HDB Financial Services.

6) Listing to meet RBI mandate: The decision to list HDB Financial Services follows the Reserve Bank of India's mandate in October 2022, requiring NBFCs in the upper layer to list on the stock exchanges within three years. After the proposed IPO, HDB Financial Services will continue to be a subsidiary of the bank, in compliance with the provisions of the applicable regulations.

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7) Valuation: HDFC Bank is seeking a valuation of Rs 78,000-87,000 crore for HDB Finance, translating to an estimated price-to-book value of 4.5 to 5 times.

8) Financials: In FY23, the company’s loan book grew 17 percent year-on-year to reach Rs 66,000 crore, driven by strong demand for personal, vehicle, and small business loans. In the fiscal year 2023-24, the company's total revenue from operations increased to Rs 14,171 crore from Rs 12,402 crore in the previous year. Profit for the year also rose to Rs 2,460 crore in FY24 from Rs 1,959 crore in FY23.

9) Book-running lead managers: JM Financial, BNP Paribas, BofA Securities India, Goldman Sachs (India) Securities, HSBC Securities and Capital Markets (India) Pvt Ltd, among others.

10) HDB Financial Services closed the June quarter with a net worth of about Rs 13,300 crore.