HDFC stock biography: From no takers in IPO to $40 billion-merger with HDFC Bank

economictimes.indiatimes.com:

Housing Development Finance Corporation (HDFC) launched its initial public offering of shares with a face value of Rs 100 each, the issue was undersubscribed and the stock also listed below its issue price. But today, HDFC is among the top 10 most valuable companies in India. From a mere Rs 7 somewhere in 1992, the value has skyrocketed in over 3 decades to become a four-digit stock.

HDFC shares earlier this month scaled a lifetime high of Rs 2,926 and its market capitalization swelled to over Rs 5 lakh crore. The stellar growth in HDFC stock over the last 3 decades has been backed by its aggressive expansion plans from being just a retail home loan company. Founded by HT Parekh and his nephew Deepak Parekh, HDFC forayed into banking in 1995 which gave birth to HDFC Bank.

The founders wanted to tap the huge opportunity in a fast-growing country where the young population aspired for wealth and social status. Today, HDFC Bank is among the top 5 banks in India, having 7,280 branches across the country. Unlike the parent, HDFC Bank’s IPO got an overwhelming response on Dalal Street in 1995, when the issue was subscribed a whopping 53 times.

From a mere Rs 4 in 1995, the stock value has swelled to more than Rs 1,700. Despite this, HDFC Bank currently trades at 16x one-year forward EPS, which is 20% below the 15-year mean average, leaving enough room for a further expansion in valuation multiples.The Merger Taking note of the strong growth and market position of HDFC Bank, the parent company felt it was time to make the lender take the lead in the next phase of growth, and announced a reverse merger. The merger came into effect on July 1, making HDFC Bank the fourth largest bank in the world by market capitalization.