HDB Financial IPO Valuation: MD & CEO Reveals Reasons Behind Discounted Pricing Strategy

HDB Financial IPO Valuation:

HDB Financial IPO Valuation: MD & CEO Explains the Discounted Offer Strategy

HDB Financial Services is set to raise ₹12,500 crore through its public offering, with bidding open from June 25 to June 27, 2025. In a recent interview, MD & CEO Ramesh G revealed that the HDB Financial IPO valuation was determined through extensive discussions with both global and domestic investors, as well as leading bankers.

How HDB Financial IPO Valuation Was Determined

During the conversation with Moneycontrol on June 20, Ramesh G emphasised, “We’ve been doing roadshows for quite some time now, met investors globally and locally. We believe that the value has been derived by talking to investors and bankers, and we worked with them to arrive at the value.” This collaborative process underlines that the HDB Financial IPO valuation is grounded in market signals rather than speculative benchmarks.

Key Details of the IPO and Valuation

• IPO Size: ₹12,500 crore
• Price Band: ₹700–₹740 per share
• IPO Period: June 25–27, 2025
• Listing Anticipated: Mid-July 2025
• Major Shareholder: HDFC Bank continues to hold 75% post-IPO

Despite intriguing activity in the grey market, with stocks trading at a ₹1,200–₹1,250 band, bankers made it clear that the HDB Financial IPO valuation is independent of these informal premiums—rooted firmly in business fundamentals .

Why the Valuation Appears Discounted

reporters from Reuters noted:

“The initial public offering… has been priced based on the fundamentals of the business, unaffected by the roughly 70% premium the stock is trading at in the informal ‘grey market’” .

HDB Financial IPO valuation reflects its operational metrics, peer comparisons, and long-term growth narrative—not speculative hype. The ₹740 upper band yields a price-to-book multiple of 3.7x, aligning it with peers like Bajaj Finance and Shriram Finance.

Why the Discount Makes Sense

1. Realistic Market Valuation
   The IPO price is based on pragmatic expectations, reducing vulnerability to grey market volatility.
2. Strong Customer Base
   With nearly 19 million customers, diversified across retail lending, HDB Financial IPO valuation accounts for its broad, low-concentration loan book—no single customer accounts for more than 0.4% of AUM.
3. Robust Growth Metrics
   Operating income grew from ₹12,403 crore in FY23 to ₹16,300 crore in FY25, with profitability metrics like Return on Assets (2.16%) and Return on Equity (~14.7%) reinforcing the stock’s underlying strength .

Independence from Parent Bank and Governance

Despite being a subsidiary of HDFC Bank, Ramesh G clarified that HDB Financial operates independently:

• Own risk management systems
• Dedicated tech infrastructure
• Autonomous branches

This autonomy ensures the HDB Financial IPO valuation reflects standalone operational performance, not simply an extension of the parent bank.

Potential Future Capital Events After IPO

When asked about future capital needs, Ramesh G responded that the current IPO could support growth for about three to four years, minimizing the need for new capital in the near term. However, they remain open to seizing opportunities as they arise.

Balancing Regulation and Growth

Addressing the RBI’s recent draft circular on promoter shareholding thresholds, Ramesh confirmed the bank’s stake would remain at 75% post-IPO, with any future changes decided at the appropriate time. This clarity helps safeguard the HDB Financial IPO valuation by ensuring stability in governance structure.

Focus on Risk and Asset Quality

HDB Financial prides itself on maintaining low delinquency across its retail lending portfolio through:

• Selective market penetration
• Product-level risk discipline
• Ongoing customer servicing

The company reported profitability from its second year onwards, a testament to its sound underwriting practices and controlled asset quality.

Context for Investors Evaluating the Valuation

Even though the grey market indicates a much higher valuation, the strategic HDB Financial IPO valuation provides:

• Strong alignment with industry peers
• Confidence rooted in public markets
• Protection from speculative overvaluation

By choosing a valuation rooted in fundamentals, the company aims to set itself up for sustained, long-term investor trust.

Final Thoughts on HDB Financial IPO Valuation

In summary, the HDB Financial IPO valuation, as confirmed by its MD & CEO, is built on thoughtful market feedback, robust business fundamentals, and a clear commitment to growth without speculative speculation. With ₹12,500 crore being raised at ₹700–₹740 per share, the offer gives long-term investors a pragmatic entry into a high-growth NBFC with strong parentage and operational maturity.

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