The HDB Financial IPO GMP has seen a sharp uptick hours before the key listing. The big question now is whether it will be a Buy on listing day. The largest issue since the Hyundai IPO and the biggest NBFC IPO, it has garnered significant interest from both retail and institutional investors. Analysts have highlighted the rich pedigree for HDB Financial, given that it is a part of the HDFC Bank group and the bank is a key stakeholder in the NBFC.
All eyes are now on the key listing price.
HDB Financial: How do the valuations stack up?
HDB Financial has built an extensive network of 1,771 branches across 170 cities. With 70%+ of its branches located in Tier-4 towns and other rural areas, it has built a niche in serving underbanked and underpenetrated geographies. According to Deven Choksey Research, “HDB’s initial issue is priced at 3.4x TTM P/B (considered equity raise for calculating TTM BV) compared to the peer average of 4.4x TTM P/B. We believe the issue is attractively priced considering its parentage, peer group ROA average and its growth potential.”
Geojit Investments added that, “At the upper price band of Rs 740, HDB is available at a P/B ratio of 3.4x (FY25-post issue basis), which appears to be fairly priced compared to its peers. Given its diversified lending portfolio, strong parentage support, omni-channel distribution platform, granular lending model, customer expansion, asset quality, and better growth prospects, we recommend it for the long term.”
Mirae Asset Capital also highlighted that the strong credit rating made a case for long-term investment in HDB Financial, “The company has a ‘AAA’ credit rating, helping it to contain the COB and support margin profile. On the valuation front, at a higher price band, the issue is priced at P/BV 3.5x post-issue net worth. The issue seems to be fully priced given the business’s fundamentals and ROE of 15%. Though, the company may benefit from the strong HDFC brand going forward.”
Just to remind our readers, the unlisted shares of HDB Financial were garnering significant notional premium. It was trading at Rs 1,250 per share. However, the issue price being fixed at Rs 740 a share led to some disappointment. That said, market observers are betting on the attractive valuations.