HDFC Bank to sell up to Rs 10,000-crore shares in HDB Financial IPO; total public issue size at Rs 12,500 crore

HDFC Bank holds a 94.64 percent stake in HDB Financial Services

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HDFC Bank announced on Saturday, October 19, that it will sell equity shares worth Rs 10,000 crore via an offer for sale (OFS) in its subsidiary, HDB Financial Services Ltd, as part of the much-anticipated Initial Public Offering (IPO) of the unit. The total IPO size will amount to Rs 12,500 crore, including a fresh issue of Rs 2,500 crore.

This marks a significant milestone as HDB Financial Services prepares for its public market debut, expected by the end of the current financial year. The offer for sale (OFS) of shares held by HDFC Bank is subject to market conditions, regulatory approvals, and other considerations, the bank said in its stock exchange filing. Post-IPO, HDB Financial Services will remain a subsidiary of HDFC Bank, complying with relevant regulations.

HDB Financial Services, a non-banking financial company (NBFC), serves the retail and commercial segments, offering a wide range of products such as personal loans, vehicle loans, and loans against property. The IPO will enable HDB Financial Services to meet a listing requirement mandated by the Reserve Bank of India (RBI).

HDB Financial Services listing to meet RBI mandate

In October 2022, the RBI issued a circular requiring “Upper Layer” NBFCs, including HDB Financial Services, to list on stock exchanges within three years -- by September 2025.

Also read | HDB Financial Services picks Jefferies, JM Financial, Morgan Stanley, Nomura; kicks-off mega IPO

HDFC Bank holds a 94.64 percent stake in HDB Financial Services. It first announced plans to list HDB Financial Services on July 20, 2024, when the board approved the initiation of the listing process. On September 20, the board further approved the IPO, comprising a fresh issue of Rs 2,500 crore and an OFS from existing shareholders.

Reports suggest that the offering could fetch a valuation of $7-8 billion (up to Rs 67,000 crore), potentially making it one of the largest IPOs in recent times. In today’s announcement, HDFC Bank stated that specifics regarding the IPO pricing and other details will be determined in due course.

Active preparation for HDB Financial Services IPO

HDB Financial Services has been actively preparing for its listing and has appointed a range of investment banks as advisors, including Jefferies, JM Financial, Morgan Stanley, and Nomura. Both foreign and domestic institutions are involved, with firms like Bank of America, ICICI Securities, Axis Capital, and IIFL playing key roles in managing the IPO.

The listing of HDB Financial Services is part of the broader RBI regulatory framework mandating all “Upper Layer” NBFCs to list by 2025. HDB Financial Services, alongside Bajaj Housing Finance, falls under this category. Bajaj Housing Finance recently got listed on stock exchanges with a valuation exceeding Rs 1.4 lakh crore. HDB Financial Services is expected to follow suit, targeting a listing by the close of this financial year or December.

Ahead of its stock market debut, HDB Financial Services has demonstrated strong growth. 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. The listing of HDB Financial Services is expected to unlock additional value for its parent company, HDFC Bank.