HDB Financial IPO: Why Indian investors saw value in HDFC Bank’s shadow lending unit

Dubai: HDB Financial Services, the shadow lending arm of HDFC Bank, made a strong debut on the Indian stock market, gaining nearly 15% on opening day.

This came after a blockbuster Rs12,500 crore ($1.5 billion) initial public offering (IPO), India’s biggest this year. The listing has captured investor attention not just because of the price pop, but due to what it signals for India’s evolving financial ecosystem and growing capital markets.

The IPO was oversubscribed more than 15 times, with strong interest from marquee investors. Global giants like Morgan Stanley and Allianz SE lined up alongside domestic powerhouses like LIC of India.

That kind of participation reflects confidence in India’s fast-growing financial services sector, especially non-banking financial companies (NBFCs), which serve customers often overlooked by traditional banks.

HDB sold shares at Rs740 apiece, the upper end of its price band. The stock surged as high as Rs849.85 on debut — a near 15% gain — showing the kind of early momentum investors hope for in IPOs.

The listing comes at a time when India’s $5.4 trillion stock market is on the upswing, supported by foreign inflows and a dovish Reserve Bank of India (RBI).

Equity markets are flirting with record highs, and interest in IPOs is reigniting after a quieter spell post-2024. So far in 2025, India has seen $22 billion in new listings and share sales — second only to Hong Kong in Asia-Pacific, Bloomberg data shows.

So why are investors lining up behind a shadow bank? NBFCs like HDB Financial provide loans to consumers with limited credit history — a huge and underserved market in India. With 1,700+ branches, 90,000 employees, and a loan book nearing $12 billion, HDB is a significant player.

These lenders are expected to benefit as the RBI moves to stimulate the economy through rate cuts and liquidity infusions. According to Quantace Research, such policies are tailwinds for shadow lenders and private banks, with HDB well-positioned to capitalise on rising consumer demand.

Investors were also drawn to the relatively attractive pricing. HDB’s stock was offered at 3.4 times its book value, cheaper than competitors like Cholamandalam Finance (5.7x), Sundaram Finance (4x+), and Bajaj Finance (6x), Bloomberg analysis shows. Analysts like Yes Securities’ Rajiv Mehta called it a “palatable valuation” that could deliver healthy returns.

While some previous large IPOs have disappointed post-listing — Paytm’s losses being a prime example — others like Eternal have surged over 80% in the first month. HDB’s strong start could inspire confidence for other expected listings this year, including Tata Capital and LG Electronics India.

Beyond the numbers, HDB’s IPO success tells a deeper story. It signals a maturing Indian investment landscape where institutional and retail investors alike are willing to back businesses expanding financial inclusion.

For everyday investors, it’s a reminder that well-priced listings from trusted groups like HDFC Bank can offer long-term value — especially in sectors aligned with India's growth story.