Holders of HDB’s unlisted shares face losses as IPO is priced 40% lower

Investors in HDB Financial Services, who purchased shares of the company in the unofficial market in recent months, were in for a jolt after the company set the price band for its upcoming IPO at about 40% below its latest unlisted price.

The issue price of HDB’s ₹12,500-crore IPO was fixed at ₹700-740 per share, against the price of ₹1,225 in the unlisted market as of June 18. Shares of HDB Financial had made a high of ₹1,550 in the unofficial market in September last year, as per data from unlistedzone.com.

Analysts said several investors bought shares of the HDFC Bank subsidiary, at higher levels on expectations that the IPO would be priced at higher levels.
“In the unlisted market, HDB Financial’s shares were bought at 5 to 6 times price-to-book (P/B), which is a significant premium to HDFC Bank’s 2.9 times P/B. This puts early investors at risk of losses unless the stock lists at a substantial premium, which seems unlikely,” said Apurva Sheth, head of research at Samco Securities.