HDB Financial Services Ltd., the NBFC arm of HDFC Bank, is preparing for a landmark IPO estimated at ₹12,500 crore (~$1.5 billion), likely to be launched by mid-July 2025. This IPO isn't just another fundraising event — it’s driven by a regulatory mandate from the Reserve Bank of India (RBI), which requires "Upper Layer" NBFCs to be listed by September 2025.

With the UDRHP filing underway and anchor discussions in progress, investors are now asking: Is HDB Financial Services fairly valued or is the premium already priced in?

IPO Valuation Range and Unlisted Price

The IPO is expected to value HDB Financial Services between ₹65,000 to ₹70,000 crore, implying a price band in the range of ₹820 to ₹880 per share. This estimate is based on internal investor presentations and peer valuation comparisons.

However, in the unlisted market, HDB shares are trading above ₹1,200, implying a valuation north of ₹95,000 crore — a steep 35–40% premium over expected IPO pricing. This disconnect could mean one of two things:

• A potential listing day disappointment for those buying at elevated unlisted prices

• Or, optimistic investors betting on long-term compounding from a high-quality lending franchise

Financial Performance Snapshot (FY22–FY25)

Note: FY25 profitability was impacted by a sharp rise in provisions and contingencies, which increased to ₹2,113 crore, up nearly 100% over FY24. This rise in provisioning was likely precautionary amid macro uncertainty or portfolio stress, which dragged PAT down to ₹2,176 crore despite a strong 24% jump in interest income.

This indicates that while core business remains strong, credit cost fluctuations can impact earnings trajectory — something investors should monitor in the run-up to IPO.

Valuation Concerns: Is the Premium Justified?

As per FY25 projected book value of ₹198.79, the implied P/B at the upper IPO band of ₹880 comes to around 4.4x. In contrast:

• Most listed NBFCs like Cholamandalam, L&T Finance, and Mahindra Finance trade between 2.5x–5x P/B

• Even high-quality players like Bajaj Finance have traded near these levels during consolidation periods

At 5x+ P/B in the unlisted market, HDB Financial is priced like a premium lender, even though it has:

• No banking license

• Slower loan growth compared to peers

• Moderate ROE trajectory

This raises caution for investors entering at elevated levels in the secondary market.

Regulatory Backing and Growth Potential

Despite valuation concerns, HDB enjoys:

• Parentage of HDFC Bank, India’s most trusted private lender

• Deep distribution in semi-urban and underbanked regions

• Diversified loan book with strong presence in vehicle finance, personal loans, and SME lending

Additionally, the regulatory push for listing ensures full compliance and governance transparency, which could unlock future lending headroom.

Conclusion

The HDB Financial IPO is a rare opportunity to invest in a scaled NBFC backed by India’s top private bank. However, valuation caution is warranted — especially for those buying in the unlisted space where the pricing appears rich.

If the IPO is priced in the ₹820–₹880 band, it may offer reasonable entry for long-term investors. But those holding unlisted shares above ₹1,200 should temper listing day expectations or be ready for the long haul.

UnlistedZone Recommendation: Wait for the IPO price band announcement. If you're already invested in unlisted shares, monitor anchor investor interest closely. If you're evaluating entry, compare P/B ratios and ROE profiles with listed peers.