India’s largest private sector bank, HDFC Bank Ltd, is planning to go for an initial public offering (IPO) of its NBFC arm, HDB Financial Services Ltd., before March 31 in a deal that could see the company raise more than ₹100 billion ( ~ US$1.4 billion), reported Bloomberg, citing people aware of the development at HDFC which is yet not in public.
HDFC is working with Bank of America Corp. and Morgan Stanley to manage an initial public offering of its NBFC unit, said the report. The bank plans to sell the shares in HDB Financial Services Ltd. before March 31.
Founded in 2007, HDB Financial Services is a non-banking financial company (NBFC) that offers various products such as personal loans, commercial vehicle loans, gold loans, and loans against property.
As India is going through liquidity crunch and NBFCs are among who suffered most, HDFC aims to raise funds in order to expand its lending services through its shadow banking unit and selling shares in the unit will help the Aditya Puri-led bank raise funds.
The upcoming IPO is expected to be a mix of primary and secondary share sale and it will largely be a primary capital raising exercise given the current market conditions, said a report on same by LiveMint.
Notably, despite the NBFC crisis in the country when other NBFCs got hit by rising borrowing costs after the India witnessed shunning down of credit market post the infamous crisis at IL&FS, the credit profile of HDB Financial has remained unscathed even as many other shadow lenders in the country have suffered.
According to HDB website, HDBFS is accredited with CARE AAA & CRISIL AAA ratings for its long-term debt & Bank facilities and an A1+ rating for its short-term debt & commercial papers, making it a strong and reliable financial institution.
HDB Financial Services has about 1000 branches spread across 22 States & 3 Union Territories in India.
HDB Financial reported a profit of 11.5 billion rupees in the year ended March 31 on a total income of 87 billion rupees, data available on the lender’s website shows.
Fintech segment is one of the most lucrative business segment in India. To recall, Japan’s SoftBank is too reportedly setting up a big fintech platform in India and for this Softbank is said to be finalizing a massive US$1 billion deal by investing $1 billion in Mumbai-based Piramal Enterprises’ financial services arm, which primarily deals in wholesale and corporate debt.