Is GMP Misleading? Unpacking HDB Financial IPO’s Valuation Gap

HDB Financial IPO: Grey Market Hype Fades as Realistic Valuation Emerges

HDB Financial Services’ upcoming ₹12,500 crore IPO is in the spotlight, largely because of its strong parentage—HDFC Bank—and the initial buzz it created in the grey market. However, that excitement is cooling. The grey market premium (GMP), which once soared, has now dropped to around ₹50–51, or roughly 7% over the IPO price band’s top end of ₹740.

From Grey Market Hype to Grounded Reality

Before the IPO details were out, HDB Financial shares were trading in the unlisted market at ₹1,200–1,350—nearly 70–80% above the IPO price. Now, the sharp fall in GMP has sparked key questions: Is the IPO more reasonably priced now? Or are early unlisted investors staring at notional losses of 40–45%?

At ₹740, the IPO values HDB at 3.72x its FY24 book value—broadly aligned with peers like Bajaj Finance and Shriram Finance. This indicates a more conservative and fair valuation approach, especially for institutional investors.

Why Was There a Valuation Gap?

1. Grey Market Speculation:

Pre-IPO trading was driven by limited supply and retail frenzy, rather than solid fundamentals. Prices rose sharply due to investor demand, not because of structured financial analysis.

2. Retail FOMO (Fear of Missing Out):

Many investors bought at ₹1,200–1,350 in the unlisted market, expecting bumper listing gains. Now, they face deep notional losses, exposing the risks of blindly following grey market trends.

What’s in It for HDFC Bank?

HDFC Bank, which owns 95% of HDB Financial, is offloading 12.95 crore shares via Offer for Sale (OFS). Acquired at an average price of ₹46.4 per share, HDFC Bank stands to make over ₹9,370 crore in gains if the IPO is fully subscribed at the top end of the band. It also helps the bank comply with the RBI’s upper-layer NBFC listing norms—without diluting fresh equity.

Should You Trust GMP Anymore?

Market experts suggest GMP is becoming an unreliable metric—especially for well-priced, fundamentally strong IPOs. Institutional investors are now prioritizing sustainable valuations over hype. For retail investors, the sharp correction in GMP may actually be a good thing—allowing entry into a high-quality NBFC at a fair price.

HDB’s focus on Tier-2 and Tier-3 markets, backed by HDFC’s brand and strong fundamentals, makes it a compelling long-term bet—even if immediate listing gains are moderate.

Bottom Line:

Don’t let grey market signals cloud your judgment. For serious investors, the HDB Financial IPO may still offer strong long-term value—just without the speculative thrill.