HDB Financial Services: A Strong IPO Debut

Shares of HDB Financial Services, backed by HDFC Bank, made a remarkable debut on the stock market, delivering over 14% gains to IPO investors on its first trading day. The stock opened at ₹835, representing a 13% premium over its issue price of ₹740, and climbed further to ₹845.75, marking a solid start for one of the year’s most anticipated IPOs.

IPO Overview

The IPO raised ₹12,500 crore, comprising a fresh issue of ₹2,500 crore and an offer-for-sale (OFS) of ₹10,000 crore. It was met with overwhelming demand, being subscribed nearly 17.65 times, with bids totaling over ₹1.61 lakh crore. This strong interest came despite broader market volatility, highlighting the appeal of HDB Financial Services to investors.

Institutional vs. Retail Demand

The demand for HDB Financial was predominantly driven by institutional investors, with Qualified Institutional Buyers (QIBs) subscribing 55.47 times their allocated quota. In contrast, retail participation was modest, at just 1.4 times. This divergence indicates differing investment motivations, with institutional players showing a strong belief in the long-term potential of the company.

Prashanth Tapse, Senior VP at Mehta Equities, noted, “It shows investors are willing to bet on legacy-backed financial services plays with clear visibility. The long-term growth potential in India’s NBFC space, especially in underpenetrated retail and SME lending, makes HDB an attractive proposition.”

Buy, Sell, or Hold?

While the stock’s early gains are promising, brokerages are divided on the next steps for investors. Emkay Global was the first to initiate coverage on HDB Financial, assigning a “Buy” rating with a target price of ₹900, implying a further upside of over 6%. The brokerage emphasized the company’s scale and diversification, noting its extensive lending franchise that serves over 19 million customers across India.

Emkay projects that HDB Financial will achieve a return on assets (RoA) of 2.7% and a return on equity (RoE) of 17% by March 2028. They also expect a compound annual growth rate (CAGR) of 20% in assets under management (AUM) and 27% in earnings per share (EPS) between FY25 and FY28.

Conversely, Mehta Equities has advised IPO allottees to hold their shares for the long term, citing HDB’s strategic role in India’s formal credit cycle. The firm highlighted the company’s strong presence in semi-urban and rural markets, robust parentage, and growing digital capabilities as key long-term positives.

Valuation Insights

At the upper end of the price band, HDB Financial is valued at a price-to-earnings (P/E) ratio of 28.15x based on FY25 earnings, with an implied market capitalization of approximately ₹61,253 crore. Mirae Asset Capital Markets noted that HDB’s fundamentals remain strong, with a RoA of 2.2% and a RoE of 14.7% in FY25, alongside stable asset quality—gross non-performing assets (GNPA) stood at 2.26%.

While Mirae described the IPO as “fully priced given the business’s fundamentals and ROE of about 15%,” they acknowledged that the company could benefit from the strong HDFC brand in the future.

Highbrow’s Singh pointed out that HDB trades at a discount to Bajaj Finance but offers better diversification, especially if it successfully leverages HDFC Bank’s network to scale its 37% asset-financing business profitably. He emphasized that HDB’s 1,700+ semi-urban branches represent strategic infrastructure that no fintech can replicate overnight.

Outlook: A Bellwether for Future Listings?

The strong institutional response to HDB’s IPO could set a precedent for upcoming financial services listings. Singh remarked, “It validates RBI’s push to list large NBFCs and will embolden peers, but issuers must justify valuations with granular asset-quality disclosures to win retail.”

Mirae also noted that HDB’s AAA credit rating helps contain its cost of borrowing and supports its margin profile, making it a fundamentally attractive business—even if not undervalued.

With listing gains achieved, analysts believe that a successful debut like this may shift retail sentiment positively. Singh noted, “Retail participation could revive if markets stabilize and IPO pricing becomes more compelling.”

For IPO allottees, most brokerages recommend holding HDB Financial shares for the medium to long term, citing the company’s strong fundamentals, wide geographic reach, and solid parentage. For those who missed the IPO, analysts suggest watching for dips as potential entry points, provided the company maintains execution momentum and market sentiment remains favorable.

Conclusion

HDB Financial Services has made a significant impact with its IPO debut, reflecting strong investor confidence and interest in the financial services sector. As the company continues to grow and expand its reach, it remains a focal point for both institutional and retail investors looking for opportunities in India’s evolving financial landscape.