HDFC Bank Ltd is poised to take a significant strategic step by advancing the public offering of its non-banking subsidiary, HDB Financial Services. The highly anticipated initial public offering (IPO) is projected to take place in December or potentially by the close of the current financial year, with a valuation target estimated to be between $7 billion and $8 billion.
This IPO is designed to include both a secondary sale of existing shares and the infusion of fresh capital into the company. HDFC Bank, which currently retains a commanding 94.64% stake in HDB Financial Services, is actively engaged in the process of selecting underwriting banks for the IPO. The final selection of these financial intermediaries is expected to be completed within this month. The shortlist of international banks for this role includes major players such as Morgan Stanley, Bank of America, Nomura, and UBS Securities. Additionally, domestic financial institutions like ICICI Securities, Axis Capital, and IIFL are also anticipated to be involved in the underwriting process.
Once the selection of underwriters is finalized, HDFC Bank will proceed to file the draft offer documents with regulatory authorities, a process expected to occur within a month. This rapid progression is aimed at ensuring a smooth IPO process and timely market entry, contingent upon receiving the necessary approvals from market regulators.
HDB Financial Services, which reported a net worth of approximately Rs 13,300 crore as of the June quarter, is targeting a valuation in the range of Rs 78,000 to 87,000 crore (approximately $9 billion to $10 billion). This valuation range implies a price-to-book value multiple of approximately 4.5 to 5 times, reflecting a strong market positioning.
Sources have indicated that HDFC Bank may offer 10–15% of its stake in HDB Financial Services through the IPO. Such a move could significantly bolster the bank's capital adequacy ratio by an estimated Rs 7,800 to 8,700 crore. As of the June quarter, HDFC Bank’s capital adequacy ratio stood at 19.3%, positioning it favorably within regulatory requirements.
While HDFC Bank and HDB Financial Services have yet to issue formal statements regarding the IPO, there has been speculation about the potential for an off-market sale of shares. Earlier discussions with Mitsubishi UFJ Financial Group (MUFG) did not result in a conclusive agreement, adding an element of uncertainty to the process.
A banker familiar with the situation noted that initial plans included pre-IPO placements with investors. However, with the accelerated timeline for the IPO, the focus has shifted to ensuring an efficient and timely value discovery process. This strategic approach underscores HDFC Bank's commitment to navigating the IPO process with precision and agility, aiming to maximize the benefits for both the bank and HDB Financial Services.
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