HDB Financial IPO Sees 48% Overall Subscription

The eagerly anticipated ₹12,500 crore Initial Public Offer (IPO) of HDB Financial Services is receiving strong interest. This is as it extends into Day 2 of the bidding phase. Reports from the market indicate that the non-institutional investors (NII) segment is fully subscribed. The total subscription is 48%.

This marks an important point in one of the largest IPOs in recent memory. It is a good demonstration of the broad range of interest from investors. Below is a summary of the latest subscription trends and lessons learned from the recent happenings in the market.

Non-Institutional Investor (NII) Demand

The NII component of the IPO (typically high net-worth individuals (HNI). Individuals of larger holdings) was fully subscribed on Day 2. This suggests there are good levels of interest from this type of investor.

Analysts are suggesting a number of reasons for their risk appetite related to HDB Financial’s strong fundamentals. They are also saying about its affiliation (subsidiary of HDFC Bank), and showing in the NBFC space. The NII reaction is also indicative of confidence among seasoned investors. These are used to quickly moving on recognized value.

Retail Investors Showing Steady Acceptance

Retail investors have taken up about 40% of their allocation thus far.

Although this implies significant engagement, the subscription will likely increase on the last day. This is as retail investors usually wait until the very end to submit offers.

Retail investors have been anticipating this IPO because of HDFC Bank. Any brokerage houses have recommended applying for at least a medium term holding.

Employee and Shareholder Groups are Oversubscribed

Another prominent element from Day 2 is the enthusiastic participation of HDB employees, and HDFC Bank shareholders:

• Employee allocation has been oversubscribed by 2.03 times, and indicates strong internal conviction about the firm’s prospects.
• The HDFC Bank shareholder base has achieved strong participation at nearly 90 percent to date in their quota.

Similarly strong conviction from internal groups is typically viewed favorably by the larger market.

QIB Participation Not at Peak Levels

As is typical in larger IPO’s, Qualified Institutional Buyers, or QIBs, usually participate on the last day of the bidding period. At this moment, the paltry QIB subscription is not a concern, and analysts are expecting a large potential increase in QIB participation prior to the deadline.

Once QIB bids start coming in, the overall subscription numbers are likely to jump significantly, which could end up in full oversubscription of the offering.

Views of Analysts and Investment Outlook

Most investment analysts view the HDB Financial IPO in a largely favorable light, and many analysts have issued a “subscribe” ratings, particularly for medium- and long-term investors.

Analysts emphasize the company’s diverse loan portfolio, cautious lending practices, and role in the strong HDFC ecosystem as important benefits.

Some analysts have issued caution for the near-term, however, due to market volatility and valuation concerns, and have generally recommended that investors should focus on fundamentals and long term results.

Last Day Could Be Important

With only one day left for bids, the final feedback from institutional investors especially will determine the ultimate result of the IPO. Given the current momentum and previous trends, the offering could very well completely subscribed by the end of the last day of bidding.

With increasing excitement continuing to build around one of the largest compulsory financial sector IPOs in India, investors and observers are eagerly waiting for the following developments. In a very latest news on business, HDB Financial’s proposal could set a very large benchmark for upcoming IPOs in the NBFC space.

Watch out for live updates and subscription information as we approach the last day of the IPO.