RBI circular overhang weighs on HDB Financial Services valuation

HDFC Bank, India's largest private-sector lender, has likely settled for up to 30 per cent lower valuation than estimated earlier for its non-banking financial services (NBFC) arm, HDB Financial Services, whose initial public offering (IPO) opens on June 25, investment banking sources said.

- SAMIE MODAK & MANOJIT SAHA

The lender was initially eyeing a valuation of $10 billion (₹86,000 crore). However, it has agreed to sell the shares at $7.2 billion (₹62,000 crore). This is due to an overhang created by a draft Reserve Bank of India (RBI) circular requiring banks to reduce their stakes in NBFC arms engaged in similar activities to 20 per cent, they added.

According to a stock exchange filing by HDFC Bank on Thursday, the ₹12,500-crore IPO—the largest by an NBFC in the domestic market—will open for subscription on June 25 and close on June 27. The final valuation and issue price are expected to be announced on Friday.

An email query sent to HDFC Bank and HDB Financial remained unanswered till the time of going to press.