HDB Financial Services, a non-banking financial company (NBFC) owned by India’s most valuable bank, is gearing up for its highly anticipated initial public offering (IPO). This announcement has triggered a significant spike in the company’s share prices within the unlisted market, which recently peaked at ₹1,400 per share before stabilizing at around ₹1,200.  

 Market Optimism or Overvaluation?  

Despite the enthusiasm, market experts remain cautious about the inflated valuation. Brokers estimate the IPO price to range between ₹750 and ₹800 per share, significantly lower than the current unlisted market prices. Rahul Thalia, Director of Sarffin Financial Advisors, remarked, “Investors are assigning a premium valuation simply because HDB belongs to the HDFC group. While the company has potential, the optimism seems overdone.”  

 P/E Ratio Raises Eyebrows  

Over the past nine months, HDB’s unlisted shares have surged from ₹850–₹900 to as high as ₹1,450. At this level, the company’s price-to-earnings (P/E) ratio exceeds 45 times, which is considerably higher than the industry average of 28 times. With a book value per share of ₹175 in FY24 and ₹187 in the first half of FY25, analysts predict that a more reasonable IPO price around ₹750–₹800 would attract new investors.  

 Largest NBFC IPO on the Horizon  

HDFC Bank, which holds a 94.5% stake in HDB Financial, recently approved an IPO valued at ₹12,500 crore. This offering will include ₹10,000 crore worth of existing shares sold by HDFC Bank, alongside ₹2,500 crore worth of fresh equity issued by HDB Financial. Upon launch, it will set a record as the largest IPO by an NBFC in India.  

 Regulatory Push for Listing  

The IPO comes as part of compliance with Reserve Bank of India (RBI) guidelines. As an upper-layer NBFC—the highest regulatory category—HDB Financial must complete its listing by September 2025.  

 Financial Performance Highlights  

For the quarter ending September 30, 2024, HDB Financial reported net revenue of ₹2,410 crore, with a profit after tax of ₹590 crore, slightly below the ₹600 crore recorded during the same quarter in the previous year. Its total loan book stood at ₹98,600 crore, while Stage 3 loans, indicative of non-performing assets, represented 2.10% of gross loans.  

 Expansion Plans for Growth  

HDB Financial primarily offers vehicle loans, personal loans, and loans against property. To support its growing loan book, the company plans to add nearly 200 new branches in the current fiscal year, building on its existing network of 1,600 branches.  

 IPO Signals Growth and Challenges  

While HDB Financial Services is well-positioned to capitalize on its upcoming IPO, experts urge caution against overvaluation. With its robust loan portfolio, planned branch expansion, and compliance-driven listing, the company’s journey to the public market will be closely watched by investors.