HDFC Bank's board approves ₹12,500 cr IPO for HDB Financial; stock up 3% on steady Q2

Shares of HDFC Bank rose over 3% in early trade on Monday after the country’s largest private sector lender by assets and market capitalisation delivered a steady financial performance in the September quarter of the current fiscal. The sentiment was further boosted after the bank announced the much-anticipated initial public offering (IPO) of its subsidiary, HDB Financial Services Ltd, where it proposes to sell equity shares worth ₹10,000 crore.

Cheering the news, HDFC Bank shares opened higher for the second straight session at ₹1,720.05, up 2.3% over the previous closing price of ₹1,681.15 on the BSE. In the first hour of trade so far, the banking heavyweight gained as much as 3.2% to ₹1,735.75, while the market cap climbed to ₹13.3 lakh crore.  The stock inched close to its 52-week high of ₹1,791.90 touched on July 3, 2024, rising over 27% from its 52-week low of ₹1,363.45 touched on February 14, 2024.

The board of HDFC Bank on October 19 approved the financial results for the September quarter of FY25 and also gave nod to the IPO of HDB Financial Services Ltd (HDBFSL). The bank, which owns 94.5% stake in HDB, plans to sell shares worth ₹10,000 crore in the non-banking financial company (NBFC) via offer for sale (OFS) route. The share sale is subject to market conditions, regulatory approvals, and other considerations, the bank said in its stock exchange filing.

Overall, the IPO size of HDB Financial Services will be around ₹12,500 crore, including fresh equity shares worth ₹2,500 crore. The IPO is expected to fetch a valuation of around $7–8 billion (up to ₹67,000 crore), with a target listing by December or by the end of the current financial year, as per multiple reports.

The IPO decision of HDB Financial Services follows a new regulatory framework introduced by the Reserve Bank of India in 2022, mandating all “Upper Layer” NBFCs to list by September 2025. 

Post-IPO, HDB Financial Services will continue to remain a subsidiary of HDFC Bank, complying with relevant regulations.

For the July-September quarter of FY25, HDB Financial’s net revenue was at ₹2,410 crore, while profit after tax stood at ₹590 crore. The NBFC posted a PAT of ₹1,170 crore for the half year of the current fiscal, while the total loan book stood at ₹98,600 crore as of September 30, 2024.

Meanwhile, HDFC Bank reported a standalone net profit of ₹16,821 crore for the first quarter of FY25, up 5.3% from ₹15,976 crore posted in the year ago period. Sequentially, the profit rose 4% from ₹16,175 crore in Q1 FY25. The numbers are comparable on a year-on-year (YoY) basis as the merger with its parent Housing Development Finance Corp (HDFC) was completed in July 2023.

The private lender reported a net interest income (NII) of ₹30,110 crore in Q2 FY25, up 10% YoY on the back of growth in advances. Sequentially, the NII was up marginally from ₹29,837 crore in Q1 FY25. The net interest margin was flat at 3.46% as compared to 3.47% in the year ago period.

On the asset quality front, HDFC Bank’s gross non-performing assets (NPAs) rose marginally to 1.36% in Q2 FY25, compared to 1.33% in Q1 FY25, and 1.34% in Q2 FY24. The net NPAs also increased to 0.41% versus 0.39% in the previous quarter.

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