A senior Housing Development Finance Corporation (HDFC) executive confirmed on Friday that the mortgage company is looking to raise funds that would be used to maintain its stake in HDFC Bank. HDFC, which is the promoter of HDFC Bank, is set to raise funds to the tune of $2 billion in order to maintain its stake in HDFC Bank, which itself is in the process of raising money. The shareholding pattern provided on HDFC Bank’s website shows HDFC’s stake at over 21%, and it is understood from sources that HDFC would like to prevent this from slipping below the present level, in case of any equity dilution by HDFC Bank to bolster its capital base.
For this purpose, the board of directors of HDFC will meet on Tuesday to consider fund raising via share sale or other instruments through preferential issue, qualified institutional placement (QIP) or other modes, the home financier indicated in an exchange statement. It also indicated that the funds will be used to subscribe to the securities of HDFC Bank on a preferential basis. According to a media report, HDFC is in talks with a private equity firm and a sovereign wealth fund to raise as much as $2 billion through a 5% stake sale.
HDFC Bank will hold a board meeting on Wednesday to consider its fund raising plans via issue of securities through a QIP, American Depository Receipts (ADRs) programme, preferential allotment or other method. It will also consider the preferential issue of shares to HDFC. Certain media reports also indicated that HDFC Bank may raise as much as $3 billion. FE could not independently verify this. An investment banker, however, indicated that a raise of about Rs 20,000 crore was very probable. “Many banks have raised large amounts in the past, and I think HDFC Bank will also raise a sizeable figure this time,” the banker indicated.