Unlisted shares of HDB Financial Services, a key subsidiary of HDFC Bank, have recorded a sharp 30 percent rally over the past month, ahead of the market regulator Securities and Exchange Board of India (SEBI) approving its draft papers on June 3, 2025.
On June 4, at 9.45 am, unlisted shares of the NBFC are commanding Rs 1,275 apiece. The NFBC's promoter, HDFC Bank, saw its shares trade flat at Rs 1,924.8 on the NSE.
Over the past year, HDB Financial's shares have rallied 17.5 percent, while galloping 30.8 percent over the past month. The six month trend looks muted in comparison, with the firm's unlisted shares gaining about two percent during the time period.
HDB Financial Services, in which HDFC Bank holds a 94 percent stake is planning to raise Rs 12,500 crore via initial public offering (IPO), which will consist of fresh issuance of equity shares worth Rs 2,500 crore, and an offer-for-sale (OFS) of Rs 10,000 crore by the promoter.
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In a note disseminated in January 2025, Suresh Ganapathy, the Managing Director at Macquarie Capital, had written that HDB Financial Services is quoting high valuations in the unlisted markets, while peers, despite delivering higher ROEs and growth, trade at lower multiples.
At a price of Rs 800, HDB Financial would trade at 3.0x P/BV, representing a ~30 percent discount to Bajaj Finance. However, based on the traded price of Rs 1,240 in January 2025, the implied valuation of the firm is FY26F P/B of 4.6x, said Macquarie, adding, "We note that peers, despite delivering higher ROEs and growth, trade at lower multiples."
Players like Bajaj Finance, that have the potential to deliver 4 percent ROA and strong growth (34 percent in FY24E), still trade at 3.8x FY26E P/BV. Players like Shriram Finance have the potential to deliver 3 percent ROA, still trade at a discount compared to HDB Financial.
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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