Is HDFC Bank planning to hive off a stake in HDB Financial Services?
Answer
Answer
HDB Financial Services or HDBFS was once slated to be the biggest financial services IPO from the HDFC stable. However, higher NPAs and the fear of tepid pricing had forced the bank to put off the IPO. However, there appears to be a move by HDFC Bank to sell a strategic stake in HDB Financial Services. It has already roped in Morgan Stanley to find a strategic buyer so it can hive off a stake in the financial services arm.
HDFC Bank is expecting a valuation of in the range of $8 billion to $9 billion for HDB Financial Services overall. It is planning to hive off around 20-25% stake in the NBFC arm, so the bank could end up raising $2 billion to 2.25 billion from the stake sale. HDFC Bank looks at this is a better approach and it hopes that this strategic sale could become the basis for pricing the IPO at a future date when the market conditions are appropriate.
HDB handles some of the key retail and mid-corporate lending businesses of HDFC bank and includes CV finance, auto loans, commercial vehicle loans, gold loans, personal loans etc. HDB Financial has a total of 8.7 million customers under its umbrella with an impressive AUM of Rs.61,567 crore. Its net interest margins or NIM is healthy at 7.5%. However, gross NPAs had shot up to 7.75% in FY21 on enhanced retail stress.