Rare bet in the works; LIC eyeing participation in anchor book of HDB Financial Services IPO

In a strategic move signaling growing institutional confidence in India's NBFC sector, Life Insurance Corporation of India (LIC) is reportedly considering participating in the anchor book of HDB Financial Services’ upcoming initial public offering (IPO). The development marks a significant and rare instance of the insurance behemoth showing interest in the anchor segment of a non-banking financial company’s market debut—highlighting potential long-term confidence in HDFC Bank’s subsidiary.

HDB Financial Services: The IPO in Spotlight

HDB Financial Services Ltd., a subsidiary of HDFC Bank, is gearing up for a highly anticipated IPO expected to raise between ₹8,500 crore to ₹10,000 crore, according to sources close to the matter. The company, which provides personal loans, gold loans, commercial vehicle financing, and enterprise lending services, filed its draft red herring prospectus (DRHP) with SEBI earlier this year and is now in the pre-IPO placement stage.

The IPO will offer HDFC Bank a partial exit from its 95% stake in the subsidiary, helping it unlock value and augment capital. The listing is also seen as a response to long-standing regulatory expectations from the Reserve Bank of India (RBI) that banks eventually list their significant non-banking subsidiaries.

LIC's Rare Anchor Interest: A Strategic Shift?

LIC’s consideration to participate in the anchor book is viewed as a departure from its traditionally conservative investment behavior in IPOs, especially those of NBFCs. Historically, the state-run insurance giant has either stayed away from anchor categories or kept its bids minimal in such issues.

“This is definitely a rare and interesting move by LIC,” says Ramesh Nair, Senior Vice President at a Mumbai-based brokerage. “For an institution known to act more like a stabilizer in volatile markets, to show interest in an NBFC anchor allocation implies high confidence in the parentage and fundamentals of HDB.”

LIC’s involvement would not only provide credibility to the IPO but also boost investor confidence, particularly among domestic institutional investors.

Market Context: NBFCs Back in Favor

The market landscape for NBFCs has shifted dramatically in recent quarters. Following a turbulent period marked by liquidity constraints post-IL&FS and DHFL crises, the sector has seen a robust revival driven by rising credit demand, improving asset quality, and expanding retail lending.

“HDB Financial is well-positioned with its strong parentage, diversified loan book, and increasing presence in tier-2 and tier-3 cities,” says Meenal Shah, Banking and Financial Analyst at a domestic rating agency. “LIC’s interest could set a precedent and trigger wider institutional appetite, especially from long-term domestic investors.”

According to market insiders, the IPO is likely to price the shares in the ₹450–₹500 range, valuing the company at approximately ₹60,000 crore. The anchor book is expected to be finalized 1–2 days before the public offering opens, and institutional interest will be keenly watched.

Why This IPO Matters: Strategic Implications

For HDFC Bank, listing HDB Financial Services fulfills multiple objectives. Firstly, it aligns with regulatory expectations of separating banking and NBFC operations. Secondly, it monetizes part of a high-growth asset without affecting the core banking business. And third, it paves the way for improved capital ratios ahead of Basel III norms and future credit cycle expansions.

More broadly, the IPO is expected to become a bellwether for the financial services segment in FY26, especially if it draws high-quality anchor participation.

“LIC coming on board would be a big win—not just for HDB but also for India’s IPO market at large,” says Alok Mathur, Managing Director at a leading investment bank managing the issue. “It signals a thaw in LIC’s IPO strategy and opens the door for future collaborations in high-growth segments.”

Investor Outlook: Cautious Optimism with a Premium Tag

Retail and HNI investors are watching the IPO closely, with many seeing it as an opportunity to invest in a rare, high-quality NBFC directly backed by a banking giant. However, analysts caution that valuation and asset quality performance over the next two quarters will play a crucial role in determining long-term returns.

HDB’s recent financials show a steady growth trajectory, with net profit up 17% YoY in FY24, and gross non-performing assets (GNPA) under control at around 2.2%. The company also holds a healthy capital adequacy ratio of over 19%, reassuring to institutional players.

Market experts believe that if LIC confirms its anchor participation, it could lead to a strong oversubscription in the QIB (Qualified Institutional Buyers) portion, potentially boosting demand across all investor categories.

LIC’s possible participation in the anchor book of HDB Financial Services’ IPO signals a significant shift in institutional investment behavior and underscores confidence in the broader Indian financial ecosystem. As the IPO gears up for launch, all eyes will be on anchor allocations and pricing, which could set the tone for the rest of FY26’s capital market action.

If executed successfully, this IPO will not just mark a win for HDB and its investors but also reinforce LIC's evolving role in shaping India's capital market narrative.