HDB Financial likely to list with moderate gains

Synopsis

HDB Financial Services' IPO, oversubscribed 16.69 times, is expected to debut with moderate gains. Analysts suggest investors who missed the allotment can consider buying for the long term. Experts predict a listing gain of 5-10%, advising a minimum 3-year investment horizon for potential returns, citing the company's strong fundamentals and reasonable IPO pricing.

Mumbai: Shares of HDB Financial Services - India's largest initial public offering (IPO) this year - may debut with moderate gains on bourses on Wednesday. Analysts said the investors who did not receive allotment of shares in the issue or who did not subscribe to the IPO can buy the stock for a long-term horizon on its listing.

HDB Financial's ₹12,500-crore initial public offering (IPO) was subscribed 16.69 times on the final day of bidding on Friday. The qualified institutional buyers (QIBs) portion was subscribed 55.47 times, while the non-institutional investors (NIIs) or high-net-worth individuals portion and the retail investors portion were subscribed at 9.99 times and 1.41 times, respectively.

As of Tuesday evening, the unofficial grey market premium (GMP) of the company had bounced back to ₹73, or 9.9% of the IPO price of ₹740, as of 6:30 PM. It had fallen to a range ₹50-68 in the last week, as per data from investorgain.com.

"We expect a listing gain of ₹50-60 per share on listing of HDB Financial Services tomorrow," said Deven Choksey, Managing Director at DRChoksey FinServ. "The issue was priced fairly, and hence, we may not see a fall on its listing, so long-term investors may consider buying the shares at their debut."

Choksey also said investors should consider holding the shares for a minimum 3-year horizon.

"HDB's listing should be decent, with 5-7% listing gains over the issue price," said Sunny Agrawal, head of fundamental research at SBI Securities.

Agrawal said only those investors who are looking to invest from a long-term investment perspective with return expectations of 15-18% CAGR (compounded annual growth rate) should buy HDB, post listing.

HDB Financial's issue is the largest ever by a non-banking financial company (NBFC). The parent company - HDFC Bank - sold shares worth ₹10,000 crore in the IPO, and the offer had a fresh issue component of ₹2,500 crore.

"Given HDB's strong franchise, experienced management and promoter backing, improving operating environment, and reasonable IPO pricing, we anticipate a respectable listing gain," said Siddharth Jain, fundamental research analyst, institutional equities at Yes Securities. "However, in the event such gains do not materialise, investors may consider accumulating the stock from the open market for a potential tactical upside."

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