The Securities and Exchange Board of India has given its final observation on HDB Financial Services’ draft red herring prospectus, paving the way for the NBFC arm of HDFC Bank to launch its initial public offering.

The IPO, estimated at over Rs 12,500 crore, will include a Rs 10,000 crore offer for sale by the parent company and a Rs 2,500 crore fresh issue. While the capital raised will support HDFC Bank’s capital adequacy, it remains small compared to the bank’s market capitalisation of over Rs 14.8 lakh crore.

Even before the DRHP filing, HDB Financial shares were actively traded in the private (over-the-counter) market. Approximately 5.7% of the company’s equity is available for trade, largely due to employee stock options. HDFC Bank holds a 94.3% stake in the company. As of March 2025, HDB Financial had 47,284 shareholders—a figure high enough to attract regulatory attention.

Private market trades have priced HDB Financial shares at around Rs 1,200 each, valuing the company at over $11 billion. This implies a valuation of nearly Rs 95,500 crore—about 6x price-to-book (P/B) on a trailing twelve-month basis and 5x forward P/B, assuming 20% annual book growth. This is a premium compared to other high-growth NBFCs, including Bajaj Finance, which trades at a forward P/B of 4.9x. In contrast, HDFC Bank trades at a forward P/B of 2.6x.

Which has led to many investors asking, Isn’t it better to invest in HDFC Bank instead of HDB Financial Services?

A more reasonable forward P/B multiple of 2.5–3 times would value HDB Financial shares between Rs 600 and Rs 700 apiece.

While HDFC Group companies are known for strong governance and performance, the high private market valuations of HDB Financial are raising concerns—especially in a market where institutional investors are already wary of stretched valuations.

Investors who bought HDB Financial shares in the private market frenzy may face disappointment, as the IPO is expected to be priced below current private market levels. The IPO will likely involve 10–15% of the company’s equity, and pricing will be critical to its success.

. Read more on Opinion by NDTV Profit.Investors who bought HDB Financial shares in the private market frenzy may face disappointment, as the IPO is expected to be priced below current private market levels.  Read MoreOpinion, Business, Markets 

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