Discover the real story behind the numbers and what’s next for the stock
The much-awaited initial public offering (IPO) of HDB Financial Services has made headlines, but not for the reasons early investors were hoping. Many of those who bought HDB Financial shares through private deals or the unlisted grey market are now staring at losses of up to 48% on paper. This is because the company’s IPO price band has been set between ₹700 and ₹740 per share. This is a big drop compared to the ₹1,200 to ₹1,350 range at which unlisted shares were trading before the IPO announcement.
The Impact on Early Investors
Reports show that more than 49,000 individual shareholders hold unlisted shares of HDB Financial as of June 2025. A large number of these investors had bought shares at inflated prices in the unlisted market, encouraged by the buzz and rising demand. For example, anyone who had purchased shares at ₹1,250 each is now facing the reality of those shares being valued at only ₹740 at the upper end of the IPO price band. This translates into a loss of about 40% on their investment, with some investors seeing even higher notional losses depending on the price they paid.
This gap between what private investors paid and the IPO price is a stark reminder of the risks involved in unregulated markets where prices are often driven by speculation rather than actual company performance or valuation.
Why Is the IPO Priced Lower?
HDB Financial’s IPO pricing is not a random decision. It reflects the company’s actual financial position and compares it with other listed non-banking financial companies (NBFCs). At ₹740 per share, HDB Financial’s valuation matches those of well-established peers such as Bajaj Finance and Shriram Finance. The price-to-book ratio of HDB Financial at this price point is around 3.7 times, which is in line with the sector’s average.
The company and its bankers chose this pricing to ensure that the IPO is attractive to institutional investors and retail participants in the public market. It also helps avoid the risk of the stock falling sharply after listing, which could happen if the IPO was priced too high. In short, the aim was to offer a fair price based on fundamentals, rather than chase the inflated figures seen in the grey market.
How HDFC Bank Benefits
HDB Financial’s parent, HDFC Bank, stands to gain significantly from this IPO. The IPO involves both a fresh issue of shares worth ₹2,500 crore and a sale of existing shares by HDFC Bank worth around ₹10,000 crore. HDFC Bank had originally acquired these shares at an average cost of about ₹46 each. Even at the ₹740 IPO price, HDFC Bank is set to make a large profit on its investment. This reflects the long-term value creation by HDB Financial under the HDFC Group, but also highlights the difference between what large institutions paid and what individual private investors have paid in recent years.
Lessons from the Grey Market Hype
For months, the grey market — an unofficial and unregulated space where shares of unlisted companies are traded — was abuzz with talk of high premiums for HDB Financial shares. In some cases, shares were changing hands at premiums as high as 70% over expected IPO prices. However, this excitement did not match the company’s real value as determined by formal market channels. When the actual IPO price was announced, the grey market premium dropped sharply, and those who had paid high prices in private deals found themselves at a loss.
This experience serves as a reminder that prices in unlisted markets can often be misleading. The lack of formal regulation means that buyers take on higher risks, and without proper checks, prices can rise more on sentiment and demand than on actual worth.
The Bigger Picture for the NBFC Sector
HDB Financial’s IPO is also significant because it comes at a time when the Reserve Bank of India (RBI) has directed large NBFCs to list publicly. The goal is to bring greater transparency and accountability to the sector. While this move is good for the industry in the long run, it also puts pressure on companies to offer fair pricing in their IPOs and on investors to be more cautious.
This IPO might set an example for how other large NBFCs approach their market listings. Companies will be careful to price their shares based on realistic valuations, and investors may become more wary of grey market deals after seeing what has happened with HDB Financial.
What Lies Ahead for HDB Financial
While early investors might be facing losses today, HDB Financial as a company remains strong. It has a large customer base and a solid presence in retail lending, business loans, and asset finance. With backing from HDFC Bank, the company is expected to continue its growth journey, and the IPO could provide it with the additional capital it needs for expansion.
The conservative pricing of the IPO could actually work in favor of new investors. If the company performs well and the stock stays stable or rises after listing, confidence in the company and its leadership will strengthen. This can also help rebuild trust in the IPO process and set a positive example for upcoming listings in the sector.
The Road Ahead for the Market
The HDB Financial IPO has shown that while grey markets can create excitement, they also carry the risk of inflated valuations that don’t hold up when it’s time for formal market pricing. This experience may encourage both retail and institutional investors to focus more on fundamentals when evaluating unlisted shares in the future.
It may also prompt regulatory bodies to keep a closer eye on the grey market and consider introducing more safeguards to protect investors. As India’s financial markets continue to mature, the hope is that investors will rely more on formal, regulated channels where valuations are driven by actual performance rather than hype.
HDB Financial’s IPO highlights the risks of unlisted market speculation and the importance of valuing investments based on real financial strength. While the 48% paper loss for early investors is a hard pill to swallow, the IPO pricing reflects an honest attempt to align with the company’s true worth and protect the interests of future investors. The next chapter will depend on how HDB Financial performs after listing and how both the market and regulators respond to the lessons from this IPO.
