HDB Financial Services Listing Premium: A Look At The Market's Appetite Post The IPO
The market has not been overly generous with large initial public offerings when it comes to listing premiums.
The mega initial public offering from the HDFC Group will test the market's appetite for awarding a listing day premium.
HDB Financial Services Ltd. is set to list on the stock exchange on Wednesday. Priced at Rs 740 per share, the IPO was subscribed 17.65 times, generating total demand of Rs 1.61 lakh crore — making it the fourth-largest IPO demand for over Rs 10,000-crore IPO issuances.
The largest demand to date was seen during Anil Ambani's Rs 10,123-crore Reliance Power IPO in January 2008, which garnered over Rs 7 lakh crore in bids. However, those were different times, with different rules governing subscriptions.
While the Indian market has matured over the past two decades and can absorb large IPOs, the appetite for paying a premium on listing day has declined in recent years. This is mainly due to the sheer volume of IPOs and the subsequent secondary market exits by pre-IPO investors or promoters offloading stakes to meet minimum-public-float norms.
Notably, the market has not been overly generous with large IPOs when it comes to listing premiums. An analysis of the last 10 IPOs above Rs 10,000 crore shows that six of the last nine closed their listing day at a discount. Despite their large size, many of these issues did not leave enough on the table for retail and high-net-worth-individual investors hoping for listing day gains.
Only three companies in this category managed to list at a premium — two of them being public sector companies, Coal India Ltd. and NTPC Green Energy Ltd., and the third being food delivery and quick commerce player Swiggy Ltd.
In the private market, HDB Financial Services is expected to list at a premium of around Rs 70 per share to the issue price of Rs 740 apiece. However, a premium listing will depend largely on institutional demand.
Notably, the anchor book lock-in will be released in phases after 30 and 90 days, while promoter and pre-IPO shares are locked in for six months. As a result, only 16.4% of the total equity will be freely tradable at listing, including around 11% held by retail investors.
The IPO's retail subscription was relatively muted at 1.5 times, while the shareholder category saw 4.5 times subscription and the employee category six times. The non-institutional-investor category, comprising mainly HNIs, was subscribed 10.6 times — with small NIIs subscribing 6.8 times and large NIIs 12.4 times. The muted response from this segment is partly due to many investors holding shares bought in the private market at prices above Rs 1,200 apiece, resulting in mark-to-market losses and lock-in shares.
The only category that saw strong demand was qualified institutional buyers, with subscriptions of 58.6 times. This segment alone generated demand worth over Rs 1.31 lakh crore, with bids evenly split between foreign portfolio investors and domestic institutions like insurance companies, mutual funds and pension funds.
HDB Financial Services is seen as fairly priced, with its FY26 adjusted price-to-book ratio at around 3.3 times. However, whether this will translate into a meaningful listing premium remains to be seen, as much of the demand is driven by the expectation of low allocation for institutional investors. Mutual funds, in particular, were active participants in the anchor book.
Post-listing, the public will hold 25.58% in the non-banking financial company, with mutual funds holding 3%, insurance companies 0.76%, banks 0.70%, FPIs 4.16% and retail investors 16.3%. The company will have over 25.3 lakh shareholders at the time of listing, including around 24.29 lakh retail investors holding shares with a nominal value of less than Rs 2 lakh.
