Following reports of Japan-based MUFG picking up 20 per cent stake in HDB Financial Services, HDFC Bank without confirming plans to sell its stake, hinted that the proposal is being considered to meet listing requirements and the bank is exploring all options including the stake sale.

“Our investment in HDB Financial is a financial investment. We hold around 94.8 per cent stake. HDB is in the upper layer of NBFCs which means it needs to be listed by September 2025 under regulatory guidelines,” said HDFC Bank CFO Srinivasan Vaidyanathan.

“All possibilities will be evaluated to get to that end outcome, so we’ll have to be patient. There are several approaches to take there, and all possibilities are under evaluation,” he said in the bank’s earnings call.

Valuation dynamics

The remaining 5 per cent shareholding in the company is by employees under an ESOP scheme.

MUFG is reportedly looking to acquire 20 per cent stake in HDFC Bank’s non-banking arm for around $2 billion, valuing the company at $9-12 billion, nearly five times the book value of HDB Financial. The transaction will be one of the largest deals in the NBFC sector.

In January 2024, Vaidyanathan had said that the bank is working to list the company and the preparatory work for the IPO would commence shortly.

HDB Financial‘s IPO will be the first public issue by the amalgamated entity following the merger of erstwhile HDFC with the HDFC Bank effective July 2023.

For FY23, HDB Financial reported total revenue from operations of ₹12,403 crore and profit after tax of  ₹1,959 crore. The company primarily focuses on providing vehicle, small business, personal and gold, CV/CE and tractor loans and loans against property.