Mega IPOs turn into mega disasters: Can HDB Financial break the Rs 10,000 crore curse?

Time of India

a day ago

India's mega IPO market has become a graveyard for investor wealth, with a staggering pattern emerging that should alarm anyone betting big on
HDB Financial Services
' Rs 12,000 crore debut.
Out of the last eight IPOs exceeding Rs 10,000 crore, six have delivered crushing losses to investors within six months of listing, posting an average negative return of 20%. The carnage deepens over a year, with average losses widening to 25%, only SBI Cards managed to stay afloat with positive returns, according to data from SAMCO Securities and ACE Equity.
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The carnage spans across sectors: Paytm collapsed 62% in six months and 65% over a year, while Reliance Power imploded 52% and 71% respectively. Even insurance giant LIC, despite its blue-chip credentials, tumbled 24% in six months and 35% over 12 months.
"The track record of
mega IPOs
is frankly terrifying," said a senior fund manager who declined to be named. "When you're raising over Rs 10,000 crore, you're essentially asking the market to absorb an enormous amount of paper, and history shows that rarely ends well."
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HDB Financial Services gets Rs 900 target price. Should you buy after 13% listing pop?
HDB Financial's Promising Start
Yet
HDB Financial
Services defied initial skepticism, listing at a 13% premium to its issue price and touching a high of Rs 845.75 on BSE. The
HDFC Bank
subsidiary's debut has prompted bullish calls from analysts betting on its unique positioning in India's credit landscape.
Emkay Global
led the charge with a buy rating and target price of Rs 900, representing 22% upside potential. "What makes HDBFS a great investment? It is backed by HDFC Bank's parentage and AAA rating. It has the right ingredients in the form of financial capital and human capital to be a successful, high-quality lender," the brokerage said in its initiation note.
The firm highlighted HDB Financial's strategy of targeting tier-4 towns and beyond, serving unbanked customers with limited credit history — a niche that could prove lucrative as India's credit penetration deepens.
Unlike previous mega IPO disasters, HDB Financial carries the backing of India's largest private sector bank, a factor that analysts believe could shield it from the typical post-listing blues.
"Given the strong subscription momentum and prevailing bullish sentiment in the market, we recommend holding the stock for the long term, as HDB Financial Services is strategically positioned to benefit from India's structural credit growth, especially within the retail and SME financing segments," said Prashanth Tapse, Senior VP (Research) at Mehta Equities.
Emkay Global projects the company will deliver approximately 20% AUM growth and 27% EPS CAGR, with return on assets improving to 2.7% and return on equity reaching 17% by FY28, up from 2.16% and 14.7% respectively in FY25.
HDB Financial has already scaled to over Rs 1 trillion in assets under management without raising external capital for eight years, a feat that distinguishes it from many of its mega IPO predecessors that were still burning cash or struggling with profitability.
The company has weathered multiple credit cycles, including the Covid-19 pandemic, while maintaining profitable growth through its diversified product portfolio spanning secured and unsecured loans.
However, regulatory headwinds loom. The RBI's draft circular on 'Forms of Business and Prudential Regulation for Investments' could force
HDFC Bank
to either merge HDB Financial or reduce its ownership below 20%, a development that could reshape the investment thesis entirely.
For investors who missed the IPO allocation, Tapse suggests accumulating on post-listing corrections, particularly during market volatility. "HDB Financial Services offers a value-driven opportunity with both defensive and growth characteristics, best suitable for investors with a 3-5 year investment horizon," he noted.
Whether HDB Financial can break the mega IPO curse remains to be seen, but its strong parentage and established business model offer more hope than the graveyard of failures that came before it.