HDB Financial shares rebound from IPO price after RBI Governor remarks; Here's why

Shares of HDB Financial Services Ltd. rebounded from the lows of the day, gaining as much as 3.5% on Wednesday, October 1, after remarks made by Reserve Bank of India Governor Sanjay Malhotra, in his post policy remarks. This is the best single-day gain for the stock since it made its trading debut on July 2.

Governor Malhotra alluded to the draft circular on forms of business and prudential regulations, which was issued in October last year and has now been formalized. The final guidelines will be issued shortly.

However, a key aspect within those norms, the proposed regulatory restriction on the overlap of business between banks and group entities, has been done away with in the final guidelines. This has now been left to the wisdom of the board of the banks.

The proposed norms were a key overhang on HDB Financial, as the same was highlighted by the company in its Red Herring Prospectus ahead of its IPO as well.

"Currently, our Company offers the same products as those offered by our Promoter and certain members of our Promoter Group, namely, HDFC Sales Private Limited which is engaged in providing BPO services and is a registered corporate agent for certain promoter group members, and HDFC Securities Limited which is also a registered corporate agent. The RBI may direct that a particular product may not be offered by both us and the Promoter or a relevant member of our Promoter Group. Such restrictions may adversely impact our business, results of operations and financial condition," HDB Financial's RHP had stated back then.

HDB Financial Services' shares had slipped below their IPO price of ₹740 per share in intraday trading on Monday. The stock had made a post-listing high of ₹891 before entering a corrective phase. The company's shareholder lock-in period also ended recently.

Shares of HDB Financial Services are trading 3.4% higher at ₹775.65.