📉 HDB Financial IPO vs Unlisted Share Price: A Costly Lesson for Investors

📉 HDB Financial IPO vs Unlisted Share Price: A Costly Lesson for Investors

💡 Introduction

Many investors were disheartened to see HDB Financial Services Ltd’s IPO price band of ₹700–₹740, especially after buying unlisted shares at ₹1,500 or more. 😞

As a mentor and investor, I empathize deeply. This is a classic case of the risks associated with the unlisted market—where hype often trumps fundamentals.

In this blog, let’s decode:

• Why the unlisted share price was so inflated
• What went wrong

📘 Lessons for future pre-IPO investments

📉 Why Was There a Price Discrepancy?

1. 🚫 Lack of Regulation in Unlisted Markets

No Transparency: Unlisted companies aren’t bound by SEBI’s detailed disclosure norms.

No Reliable Pricing Mechanism: Prices are driven by broker sentiment or grey market hype, not fundamentals.

FOMO & Speculation: HDB, backed by HDFC Bank, saw premium pricing due to fear of missing out—not realistic valuation.

2. IPO Valuation Is Rigorously Done

Merchant bankers & SEBI use realistic financial models to value IPOs.

IPO pricing reflects current revenue, profit, debt, peer valuation, and market appetite.

In contrast, unlisted shares may get priced emotionally, not rationally.

💡 In HDB’s case, the premium wasn't backed by growth in profits or returns on equity.

3. 🔒 Liquidity Challenges

Unlisted shares are hard to sell quickly and often involve discounts.

Even after the IPO, there's a 6-month lock-in period for pre-IPO investors.

📚 What Investors Should Learn – Key Takeaways

1. 📊 Do Proper Due Diligence

Before buying unlisted shares:

Study financials (Revenue, EPS, Profit, RoE, CRAR).

Understand the business model—Is it scalable? Profitable? Sustainable?

Compare with listed peer companies.

For NBFCs like HDB, review:

👓 Loan book quality

🧮 Capital Adequacy Ratio

📉 NPA levels

2. ⚠️ Acknowledge Unlisted Market Risks

❌ Illiquid – You may not find a buyer when you need to exit

❌ Valuation Uncertainty – Brokers can quote speculative prices

❌ Limited Data – Hard to do deep research

❌ High Failure Rate – Especially in early-stage companies

3. 🔍 Use IPO Valuation Metrics

If buying unlisted shares:

Apply DCF, P/E, P/B, NAV methods

Compare with listed peers on growth, size, margins

💡 Many institutions found HDB’s IPO valuation reasonable, even if it was a steep drop from the unlisted price.

4. 🚫 Don’t Let FOMO Drive You

Don’t buy just because everyone else is.

Be cautious of grey market premiums—they’re often misleading.

5. 🧺 Diversify Your Investments

Keep unlisted share allocation below 10–15% of your overall portfolio.

Focus on liquid, listed equities for core wealth building.

6. 🧠 Consult Financial Experts

Always take the help of a mentor or investment analyst who can help with pre-IPO valuation and risk analysis.

🧭 Final Thoughts

The HDB Financial IPO is a reminder that discipline beats emotion in investing.

✅ IPO prices are set through a formal process

❌ Unlisted shares often float on hype and sentiment

As investors, we must stay focused on fundamentals, avoid speculation, and prioritize long-term wealth creation over short-term buzz.

📢 Disclaimer

This blog is for educational purposes only and does not constitute investment advice. Investors are advised to conduct their own due diligence before investing in any financial instrument.