from the date HDFC Bank made a surprising move by reopening talks with Japanese financial giant Mitsubishi UFJ Financial Group (MUFG) for selling HDB's stake. Money Control reported on 16th Dec about this development.
This move coming just before the much-awaited HDB Finance IPO has created many speculations.
Possible Reason For Selling Stake
One possible reason for selling HDB's stake can be the RBI norms announced on 4th October 2024, which led to HDFC Bank thinking about the possible selling of HDB's stake ahead of its IPO.
If the draft circular on "form of business and prudential regulations for investments" assumes finality. A stake sale before IPO can smooth HDB's IPO process. The draft circular says banks would have two years fromthedate of its implementation to pare stakes in their subsidiaries.
Earlier Discussion Held
“Officials of the bank are once again in touch with senior management of MUFG,” said one of the sources cited in the report. HDFC Bank offered MUFG a 20% stake sale in HDB Financial Services, with a sign that the valuation is more negotiable.
Earlier this year in April, MUFG and HDFC were in talks about selling a 20% stake in HDB Financial. However, the deal couldn't materialise due to differences in valuation. According to sources, this time HDFC Bank may be more flexible in discussing HDB's valuation.
Analyst's Statements On This Development
For something like HDB Financial, which is commanding about Rs 80,000 crore of valuation, to pare a significant stake in two years may be very difficult,” an investment banker said on condition of anonymity. “It would make it easier for HDFC Bank to bring in a large investor ahead of HDB Financial’s IPO and then divest the stake if required,” he added.
“Given that it’s the second time HDFC Bank is engaging with MUFG for a stake sale in HDB Financial, it would be too premature to say which way the talks will go,” a banker aware of the deal said.
About HDB IPO
HDB Finance, the non-banking financial arm of HDFC Bank, has filed a DRHP (Draft Red Herring Prospectus) with SEBI for its IPO. This initial public offer is for Rs 12,500 crore, where Rs 10,000 crore is an offer for sale (OFS) and Rs 2,500 crore is a fresh issue.
The NBFC wants to use this fund raised from fresh equity to enlarge its Tier 1 capital base for future lending requirements. Their current capital requirements are expected to grow, and they plan to fund that through the NBFC’s growing assets and business.
Read more about HDB Financial IPO here
Is HDB Stock a Good Buy Before IPO?
All the significant parameters of HDB Financial Shares have shown a positive indicator. This includes revenue, profit, EPS, and the increasing loan book. The operations of HDB have increased in the last 1 year, with its asset quality improving year on year. Hence actively traded in the unlisted share market.
Backed by HDFC, the current HDB financial share price can be a gainful buy, especially with the IPO around the corner. At Stockify, we help our clients uncover the best unlisted shares and increase their wealth with our in-depth research and insights. Our platform serves all your unlisted share needs with the best offerings.
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