HDB Financial Services IPO Gains Momentum as Unlisted Shares Surge 30% Amidst Regulatory Approval

Excitement is building around the anticipated Initial Public Offering (IPO) of HDB Financial Services Limited, as its unlisted shares have seen a remarkable surge of over 30% in the past month. This rally comes on the heels of crucial regulatory clearances, with the Securities and Exchange Board of India (SEBI) granting its approval for the IPO on June 3, 2025. The market regulator's observation letter, signifying final approval, was issued on May 28, setting the stage for HDB Financial Services to tap into the primary market.

Over the past year, HDB Financial Services Limited Unlisted Shares have demonstrated steady growth, increasing by 17.5%. While the recent monthly surge has been particularly impressive, the six-month performance indicates a more modest increase of approximately 2%. This upward trajectory reflects growing investor interest and confidence in the financial institution's potential.

HDB Financial Services submitted its Draft Red Herring Prospectus (DRHP) in October 2024, outlining plans to raise up to Rs 12,500 crore through the IPO. The offer comprises both a fresh issue of shares worth Rs 2,500 crore and an offer-for-sale (OFS) component, where promoter HDFC Bank is expected to offload shares worth Rs 10,000 crore. Following the IPO, HDFC Bank, which currently holds a 94.6% stake in the company, will continue to maintain a significant stake, with HDB Financial Services remaining a subsidiary.

The IPO is strategically timed to comply with the Reserve Bank of India’s (RBI) October 2022 directive, mandating large non-banking financial companies (NBFCs) to be listed by September 2025. This move aligns with regulatory requirements and positions HDB Financial Services for enhanced transparency and governance.

As of September 30, 2024, HDB Financial Services reported a gross loan book of Rs 98,620 crore, showcasing a compound annual growth rate (CAGR) of 20.93% over the preceding two years. The company’s assets under management stood at Rs 90,230 crore as of March 2024, according to the DRHP, highlighting its robust financial health and market presence.

For the March 2025 quarter, HDB Financial Services reported a net profit of Rs 531 crore on a standalone basis. Revenue from operations grew 16% year-on-year to Rs 4,266 crore, with interest income rising 18% to Rs 3,623 crore. The company plans to allocate the funds raised from the fresh issue of shares primarily to bolster its Tier I capital base. This strategic allocation will support future capital requirements, facilitate business expansion, and enhance lending capabilities, as detailed in the DRHP.

Furthermore, HDB Financial Services may consider a pre-IPO placement after discussions with the lead book-running managers, providing additional flexibility in its capital-raising strategy.

The positive sentiment surrounding HDB Financial Services' IPO is also reflected in the performance of HDFC Bank's stock. On June 4, HDFC Bank’s shares rallied, hitting an intraday high of Rs 1,938 apiece on the NSE following SEBI’s approval for the IPO. This immediate market response underscores the interconnectedness and positive spillover effects of HDB Financial Services' developments on its parent company.

In conclusion, the upcoming IPO of HDB Financial Services Limited Unlisted Shares represents a significant milestone for the company. With regulatory tailwinds, strong financial performance, and a clear strategic vision, HDB Financial Services is well-positioned for continued growth and market leadership. For investors, this IPO presents an opportunity to participate in the expansion of a well-established NBFC with a proven track record and promising future prospects. The successful listing is expected to unlock further value and drive long-term growth, making it a noteworthy event in the financial sector.