HDFC Group is the biggest financial services house in the country. HDB Finance Limited (HDBFL) is an NBFC and extends secured (property backed) as well as unsecured and small loans. The company has been promoted by HDFC Bank and is 95.87% owned by HDFC Bank Limited. The remaining shares are with the current and ex-employees of HDFC Bank, HDFC Group and HDB Finance employees.

This NBFC has HDFC Bank as its prime client and is so important for HDFC bank that the latter allowed merger of its two other subsidiaries into HDBFL. These subsidiaries were HBL which was engaged in sales and ADFC which was engaged in transaction processing.

HDB Finance is not a listed company and as a result its shares are not traded. However, some of the employees of the HDFC Group were allocated a very small fraction of the share capital and the grey market sale and purchase of these employee quota shares has been going since a few years, especially in the wake of consistently superb performance of the company.

Of late, the unlisted stock has seen its value go as high as Rs 90,000 crore. The unofficial market has been behaving like crazy about the restricted quantity of its available share. In the wake of the strong listing of HDFC Asset Management Co early in August, investors are making a beeline for HDB, driving the shares up by 40 per cent in the last one month alone.

The deals are done through NBFCs and brokers who approach the employee shareholders discreetly. Brokers doing deals in the unlisted space said affluent investors are buying HDB shares at Rs 1,150 a share compared to Rs 850 a piece in July. The investors have sensed a future goldmine here and have lapped up these shares late in 2016 and the quest continues. The few shareholders get 2-3 requests a month from the brokers.

Profit After Tax (PAT) of HDB for 2017-18 was Rs. 952 cr, an increase of 36% over the previous year. Total loan book is Rs. 34981 cr. This is the P&L and the Loan Book size which a finance company generally achieves in 20 years. Hence, HDB is way ahead of its peers and that perhaps speaks about the increasing market valuation of this company.

At Rs. 1150 a share, the share is traded at a price of 14.5 to its book value. The key listed NBFCs are traded at only 5-10 times. Apparently there is a rumour that the share will be listed in the next 12-15 months and the investor wants to make money when it happens.

HDFC Standard Life (November 2017) is currently trading at 61% over its offered price and HDFC AMC (August 2018) is at 67% over its listed price. This being an NBFC and performing on the lines of HDFC Bank, brokers are expecting nothing less than 100% over and above the listed price.