HDB Financial IPO leaves early investors facing big losses
New Delhi: The upcoming IPO of HDB Financial Services, worth Rs 12,500 crore, is turning out to be a worrying event for many early investors.
According to the latest Red Herring Prospectus (RHP) filed on June 19, over 49,000 individual shareholders may suffer notional losses of up to 48 per cent.
As of June 19, the company had 49,553 individual shareholders.
These investors had bought HDB shares in earlier private transactions at prices ranging from Rs 1,200 to Rs 1,350 per share.
But now, with the IPO priced at Rs 700 to Rs 740 per share, these shareholders are seeing the value of their investments drop sharply -- by 38 to 48 per cent, depending on the price at which they originally bought the shares.
For instance, an investor who purchased 1 crore shares at Rs 1,250 each would have invested Rs 1,250 crore. At the current IPO price of Rs 740, the value of those shares would fall to Rs 740 crore, leading to a notional loss of Rs 510 crore.
The IPO pricing is also lower than what was suggested by the grey market -- an unofficial market where shares are traded before they are listed on stock exchanges.
HDB's public issue includes a fresh issue of Rs 2,500 crore and an offer-for-sale (OFS) worth Rs 10,000 crore by its parent company, HDFC Bank.
As part of the OFS, HDFC Bank is selling 13.51 crore shares.
Interestingly, HDFC Bank had acquired its stake in HDB at an average cost of just Rs 46.4 per share. So, even at Rs 740 per share, the bank is likely to make a massive profit of Rs 9,373 crore from this sale, before taxes.
Meanwhile, at the upper end of the price band, the company is aiming for a post-money valuation of approximately $7.2 billion, or around Rs 62,000 crore.
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