HDFC Bank shares in focus as Japan’s MUFG set to buy 20% stake in HDB Financial

Shares of HDFC Bank are in focus today as Bank of Tokyo-Mitsubishi UFJ (MUFG) is buying a 20% stake in HDB Financial Services, a non-banking subsidiary of HDFC Bank at a $9-10 billion valuation, ahead of its proposed IPO, as per an ET exclusive report. The stock’s price fell by nearly 1% today to Rs 1519 from its closing on Wednesday.

The deal is expected to be done at 5 times the book value and once announced, this will be among the largest deals in the shadow banking space in India.

A non-deposit-taking lender, HDB Financial could fetch a valuation in the range of $9 billion to $12 billion ( ₹75,000 crore to ₹1 lakh crore) during the IPO, contingent upon prevailing market conditions, ET reported today..

ET further added that the unit of HDFC Bank is one of the larger players in the retail financing space. Its asset under management (AUM) rose to Rs 83,989 crore as of December 31, 2023, from Rs 70,084 crore as of March 31, 2023 and Rs 61,444 crore as of March 31, 2022.

HDB’s capitalisation remains healthy, as reflected in overall capital adequacy of 17.99 per cent as on December 31, 2023. Reported net worth stood at Rs 11,952 crore as of December 31, 2023, against Rs 11,437 crore as of March 31, 2023.

The cushion for asset side risks was adequate, as reflected in net worth coverage for net non-performing assets (NPAs) at around 20 times as of December 31, 2023, CRISIL said.

For the October-December quarter of the financial year (FY) 2023-24, HDB reported a profit of Rs 640 crore compared to Rs 500 crore last year. The total loan book size of the company stood at Rs 84,000 crore, growing from Rs 65,100 crore in the corresponding quarter last year.

More recently, the bank once again revived plans for an initial public offering of the unit. The process of the IPO may commence in the next few months, said the lender's Chief Financial Officer Srinivasan Vaidyanathan.

“The listing requirement of the IPO is to be in September 2025 and we expect in the next few months to commence the activity around that so that we have as much flexibility as we can to be in the market at the right time,” said Srinivasan in January.

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