Rs 227 crore: Total cost for making HDB Financial Services a listed entity

Shares of HDB Financial Services listed at Rs 835 per share on the NSE, a premium of 12.84 percent over its issue price.

HDB Financial Services, which made its debut on the stock exchanges today, spent a total of nearly Rs 227 crore to enter the public markets by way of an IPO worth Rs 12,500 crore.

As per disclosures made in its final offer document, the HDFC Bank subsidiary and a non-banking financial company (NBFC) spent Rs 226.86 crore as cumulative offer expense, which amounts to 1.81 percent of the total offer size.

The cumulative expense includes Rs 104 crore, which merchant bankers earned as fee for managing the IPO. The issue was managed by a total of 12 investment banking firms – JM Financial, BNP Paribas, BofA Securities, Goldman Sachs, HSBC, IIFL Capital, Jefferies, Morgan Stanley, Motilal Oswal Investment Advisors, Nomura, Nuvama and UBS.

Further, nearly Rs 23 crore was paid as commissions to banks, broking firms and RTAs as fees and brokerage for the bids and the processes involved in the IPO.

Meanwhile, the total cost as a percentage of the IPO size was less than two percent -- 1.81% to be precise -- which was much lower than some of the recent IPOs like Schloss Bangalore (Leela Hotels), Belrise Industies, and Aegis Vopak Terminals.

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While the total expense was in the range of 5-6 percent for both Leela Hotels and Belrise Industries, it was 3.9 percent for Aegis Vopak Terminals.

Interestingly, last year Bajaj Housing Finance, an NBFC, had launched its IPO worth Rs 6,560 crore and paid a little over Rs 110 crore in fees and commissions. It amounted to 1.7 percent of the issue size – a similar range compared to HDB Financial Services.

With an issue size of Rs 12,500 crore, HDB Financial Services IPO has been the largest till date in the current calendar year. The next biggest was Hexaware Technologies at Rs 8,750 crore.

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Apart from the merchant banking fee, which accounts for the largest cost component in the total IPO expense, the overall issue expenses include commissions paid to broking firms, fee paid to various entities including registrars, advisors, consultants, auditors, industry experts, and legal counsels among others.

Further, there are listing fees that need to be paid to the exchanges and filing fees that are paid to the Securities and Exchange Board of India (SEBI). Then there are expenses related to advertising, marketing and printing along with other miscellaneous expenses as well.

HDB Financial shares listed at a decent premium of about 13 percent over its IPO price on the National Stock Exchange (NSE) today. The listing was better than the expectations in the grey market which had priced in a 8-10 percent listing day gains.

Shares of HDB Financial Services listed at Rs 835 per share on the NSE, a premium of 12.84 percent over its issue price. The Rs 12,500-crore issue had a price band of Rs 700-740 per share.

On the BSE too, the shares were listed at Rs 835 apiece, a premium of 12.84 percent. The total market cap of the company post listing of shares stood at Rs 69,268.82 crore.