HDFC Bank has reportedly turned down an offer from Japan’s Mitsubishi UFJ Financial Group (MUFG) to pick up a stake in HDB Financial Services, its non-banking finance company (NBFC) arm.

An Economic Times report said that the private sector lender is instead going ahead with the listing of HDB Financial Services.

The report said the HDFC Bank board had rejected a proposed $2 billion purchase by MUFG. Had HDFC Bank approved the plan, the world’s second largest bank holding company would have picked up around 20 per cent in HDB Financial Services.

The rejection of the proposed deal could also disappoint the Japanese government, which had communicated its support for the transaction to the Centre, the report claimed.

Shares of HDFC Bank on Friday ended marginally lower at ₹1,625.60 on the BSE.

HDB Financial Services, which was incorporated in 2007, provides a wide range of secured and unsecured loans. According to the company’s website, it had more than 1,680 branches in the country, spread across 27 states and four Union Territories.

HDFC Bank holds a 94.7 per cent stake in the NBFC with the rest being held by employees as stock options.

It has been categorised as an upper-layer NBFC by the Reserve Bank of India (RBI) and, therefore, has to list by September 2025.

At its board meeting held on July 20, the directors of HDFC Bank had “provided an in-principle approval to initiate the process of listing of HDB Financial Services through a potential initial public offering and seek necessary approvals from the regulatory authority’’.

The IPO is expected to happen either later this year or early 2025.

For the quarter ended June 30, HDFC Bank had reported a standalone net profit
of ₹16,17.75 crore, which marked a fall of 2 per cent on a sequential basis and a gain of 35 per cent over the corresponding quarter in the previous year.