HDFC Bank on Wednesday received board approval to raise up to Rs 24,000 crore, of which more than a third will be raised from its promoter, Housing Development Finance Corporation. Of the total amount, Rs 8,500 crore will be infused by HDFC via a preferential allotment of shares. The remaining, Rs 15,500 crore, will be raised through a qualified institutional placement (QIP) of equity shares or convertible securities or through an American Depository Receipts (ADR) or Global Depository Receipts (GDR) programme, the bank indicated in a release. The private lender will be holding an extra-ordinary general meeting on January 19 to seek shareholder approval for the same. According to an analyst, the fund raising will lead to an equity dilution of close to 5% and will increase the tier-1 capital ratio of the bank by almost 300 basis points. As on September 30, 2017, the bank’s tier-1 capital adequacy ratio stood at 13.3%. On Tuesday, HDFC received board approval to raise as much as Rs 13,000 crore through equity or convertible instruments, partly to subscribe to a proposed preferential issue by HDFC Bank. The mortgage lender currently holds, along with its wholly owned subsidiaries, just over 21% stake in the country’s largest private bank. An analyst pointed out that since the preferential allotment to HDFC to the tune of Rs 8,500 crore is more than 35% of the total fund raising, HDFC’s stake in the bank is likely to rise from current levels.
Keki Mistry, vice-chairman & CEO, HDFC Bank agrees: “We will temporarily go over 21% but, once the stock options of the bank get exercised, we will come back to about 21%. I can’t give you the exact number or the percentage. It will be a little over 21%”. Market players don’t see HDFC Bank having any trouble raising Rs 15,500 crore from the market. “It is likely that the QIP might be priced at a premium of 5-7% of the current market price. There would be no dearth of takers,” said the analyst. In 2015, the bank had raised close to Rs 9,880 crore by selling shares via QIP and an ADR programme. The bank posted a 20% year-on-year growth in net profit in the second quarter. Its total advances rose 22.3% to Rs 6.04 lakh crore as on September 30, 2017 compared to the same period last year. Paresh Sukthankar, deputy managing director, HDFC Bank had earlier pointed to healthy loan growth in the second quarter in both retail and wholesale. “The retail loan growth was 21.6%, while the wholesale loan growth was marginally higher at 23.6%. So essentially both of them are ahead of the industry benchmarks,” he had observed. In September, the Reserve Bank of India (RBI) had identified the private lender as a domestically systemic important bank.