HDB IPO Sparks Grey Market Adjustments Involving NSE, NSDL, and Tata Capital

Investor confidence in India’s unlisted securities market has recently declined following the Initial Public Offering (IPO) of HDB Financial Services, which was priced significantly lower than expectations in the grey market. The Rs 12,500-crore IPO was set at Rs 740 per share, a stark contrast to the Rs 1,225 anticipated in the unofficial market. This pricing has led to notable drops in the values of other high-profile pre-IPO stocks, including NSE, NSDL, and Tata Capital, with declines ranging from 5% to 18% in recent weeks.

Impact of HDB IPO on Market Sentiment

The HDB IPO’s pricing has shifted investor sentiment dramatically. Hitesh Dharawat from Dharawat Securities noted that investors are now more valuation-sensitive, moving away from a brand-conscious approach. The IPO’s price was nearly 40% lower than what some investors had anticipated, leading to a significant loss for those who bought shares at peak prices. Following the IPO, the stock debuted at Rs 835 and closed at Rs 838 on its first trading day. This pricing discrepancy has raised concerns among investors regarding the valuations of other upcoming IPOs, particularly NSDL, which is expected to launch its own offering by the end of July.

Declining Values of Other Pre-IPO Stocks

In the wake of HDB’s IPO, the unlisted prices of other major players have also seen a downturn. NSDL’s value has fallen from Rs 1,250 to Rs 1,025, as fears mount that its upcoming IPO may be priced below current market expectations. Similarly, shares of NSE have dropped nearly 6% over the past month, as high-net-worth individuals and institutional investors begin to reduce their holdings. Despite these declines, retail investors continue to show interest in these stocks, driven by a fear of missing out (FOMO) and expectations of strong future listings.

Valuation Comparisons in the Market

Investors are increasingly comparing unlisted stock prices with those of their listed counterparts. Sandip Ginodia, director at Altius Investech, highlighted that NSDL currently has a price-to-earnings (P/E) ratio of 59.8 times, while its listed competitor, CDSL, stands at 70 times. Tata Capital is also under scrutiny, trading at a price-to-book (P/B) ratio of 10.5 times, significantly higher than Bajaj Finance, which trades at 7.4 times. Ginodia cautioned that while Tata Capital has not yet experienced significant selling pressure, prices may decline further as its IPO approaches, given the inflated valuations.

Investor Caution in the Unlisted Market

Experts are advising caution among investors in the unlisted market. The inflated expectations surrounding IPO pricing could lead to sharp declines if the actual prices do not align with market valuations. As the landscape shifts, investors are urged to remain vigilant and assess the potential risks associated with high valuations. The current market dynamics suggest a need for a more cautious approach, especially as upcoming IPOs may not meet the optimistic projections set by the grey market.

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