Mumbai: India’s largest private sector lender, HDFC Bank Ltd, is eyeing an initial public offering (IPO) of its non-bank lending unit, HDB Financial Services, that could see the company raise more than $1 billion, said two people aware of the development.

HDB, founded in 2007, offers various products such as personal loans, commercial vehicle loans, gold loans, and loans against property.

“They have been engaging with various investment banks over the last one month regarding their plans to list HDB Financial Services. They are likely to raise around 7,000-8,000 crore or more through the IPO. While the IPO is expected to be a mix of primary and secondary share sale, it will largely be a primary capital raising exercise given the current market conditions," said the first person cited above. HDFC Bank is likely to target the IPO of the non-bank arm within this fiscal, he added.

Earlier on Wednesday, Bloomberg reported that HDFC Bank had appointed investment banks Bank of America Merrill Lynch and Morgan Stanley to manage the initial share sale of HDB Financial.

HDFC Bank held a 95.53% stake in HDB Financial Services as of 31 March. The rest is held by individual shareholders and employee trusts.

A spokesperson for HDFC Bank declined to comment on the development.

The plan to list HDB Financial comes at a time when non-banking financial companies (NBFC) are facing a liquidity crunch owing to defaults by the Infrastructure Leasing and Financial Services (IL&FS) group in September 2018.

The liquidity crunch has forced several non-bank lenders to seek alternative sources of capital through divestment of various assets.

Lenders such as Dewan Housing Finance Ltd, which has found itself in the eye of the storm, has sold various subsidiaries including its affordable home finance arm Aadhar Housing Finance, which was acquired by private equity firm Blackstone, and the group’s education financing arm Avanse Financial Services, which was bought by Warburg Pincus.

The liquidity crunch has also meant that several non-bank lenders have gone slow on fresh loan disbursals.

An IPO will make HDB Financial the fifth HDFC group company to be listed on stock exchanges, following the listing of HDFC Asset Management Co. Ltd in 2018 and the listing of HDFC Life Insurance Co. Ltd in 2017. HDFC Bank and Housing Development Finance Corp. Ltd are the other listed entities of the group.

HDB reported a rise 25% rise in assets under management to 55,425 crore in fiscal 2019, up from 44,268 crore in the previous fiscal. Net profit rose to 1,153 crore in fiscal 2019 from a profit of 933 crore a year ago.

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