The country’s largest private lender has appointed Morgan Stanley More thinkers have already turned to global banks and domestic financial institutions to handle this. The lender is expecting a valuation of Rs 60,000-67,500 crore ($8-9 billion), though the final touch will come out only once the firm’s proposals are placed on the table, said one of the executives cited above.
Although initial discussions considered for a 20-25% stake, some potential suitors are keen on a path to control or joint control.
The discussions are preliminary in nature, but with the management confident that asset quality will improve in the post-pandemic economy, it is the right time to kickstart the monetization exercise, experts said. Some HDFC Group watchers also see it as a precursor to the final listing.
loan book, footprint
“While it is still uncertain how much stake HDFC Bank, as the parent of HDB Finance, will participate, it wants to ensure that it finds the right value for itself. NBFC (non-banking finance company) in line with other non-bank lending peers,” said a person.
An HDFC Bank spokesperson said as per the policy, the bank does not comment on market speculation. HDB Financial Services did not respond to queries.
In June 2019, Aditya Puri, the then Managing Director and CEO of HDFC Bank, hinted at a possible listing. This saw the stock in the gray market for around ₹1,150 for a valuation of ₹80,000 crore. It has hit those highs amid growing concerns over asset quality, which has intensified during the pandemic, and is currently hovering at ₹875 per share for a valuation of ₹70,000 crore, down from the ₹970 level in March. Used to be. Secondary market experts are of the view that the buying activity on the stock has increased significantly in anticipation of stake sale.
In a recent analyst call after the June quarter results, HDFC Bank CFO Srinivasan Vaidyanathan had said that several international and domestic investors have shown interest in the unit’s growth plans and that the bank is the market leader in terms of price discovery. can test. At its most recent Annual General Meeting in August, Managing Director Shashidhar Jagadeesan had said that an outside investor could be brought in for price discovery.
As on June 30, HDB Financial’s loan book of ₹57,390 crore was about 5% of HDFC Bank’s total advances of ₹11.47 lakh crore. Lender with employee trusts owns 95.3% of HDB Financial and some current and former bank executives own the rest. ET reported in December 2019 that Puri’s family investment vehicles had netted ₹200 crore after partially liquidating his investments. In the shadow bank cohort, it has the lowest cost of funds. The franchise has a nationwide footprint with 1,319 branches in 959 cities. HDB has three primary business lines – enterprise lending to small and medium businesses; asset financing of commercial vehicles and electronics; and short-term consumer loans.
Most of the banks have NBFC subsidiaries to serve the wide pool of customers who might otherwise find it difficult to fit into the risk profile of the bank. But with the Reserve Bank of India continuing to push banks towards capital conservation, most bank-backed NBFCs such as PNB Housing Finance have had to seek outside investors for liquidity and growth support. In January, the RBI proposed a scale-based regulatory framework for shadow banks to segregate large entities and make them “bank-like” with a stricter set of rules. It aims to protect financial stability while ensuring that small NBFCs continue to enjoy light-touch regulations and continue to grow with ease.
Head of a large financial institution aware of the process said, “This is a lineage franchise with a strong pedigree and a strong presence in the retail finance segment. Following the Fullerton purchase, many global franchisees are keen to explore investment opportunities. ” Condition of anonymity. “Final guidelines for NBFC investment are also expected soon which will further clear the regulatory air.”