India’s most valuable lender HDFC Bank on Wednesday approved a mega-fundraising plan of Rs 24,000 crore to fund its growth. This includes Rs 8,500 crore influx from its parent HDFC Ltd.
India’s most valuable lender HDFC Bank on Wednesday approved a mega-fundraising plan of Rs 24,000 crore to fund its growth. HDFC Bank had grown multifold in recent past as the bank has surpassed age-old financial conglomerate ICICI Bank in terms of assets and market capitalisation and is now is India’s second-biggest lender by assets behind India’s biggest bank State Bank of India. HDFC Bank has said that it would raise up to Rs 24,000 crore to fund its growth by selling shares to domestic and international investors including a preferential issue to its parent company HDFC Ltd.
HDFC Bank’s fundraising plan has been announced just a day after its parent company and India’s largest housing financier Housing Development Finance Corporation said that its board has approved to raise as much as Rs 13,000 crore as a part of its fundraising plans. As part of the planned fundraising, HDFC Bank will issue up to Rs 8,500 crore worth of shares to HDFC Ltd on a preferential basis, while the remainder will be raised via modes including American Depositary Receipts and a share sale in India to institutional investors.
HDFC Bank said that out of the total amount of Rs 24,000 crore, an amount maximum of Rs 8,500 shall be through the issuance of equity shares of face value of Rs 2 per equity share. The balance amount left after HDFC’s infusion, will be raised through the issuance of equity share/ convertible securities/ QIP (qualified institutional placement)/ ADR (American Depository Receipt)/ GDR (Global Depository Receipt). Following the announcement, shares of HDFC Bank hit an all-time high of Rs 1,905, rising as much as 1.05% while the stock of HDFC was trading almost flat at Rs 1706.8, down by 0.2%.
HDFC Ltd’s Rs 13,000 crore fundraise
The mortgage lender HDFC on Tuesday announced a Rs 13,000-crore fundraising plan out of which Rs 8,500 crore would be spent on buying HDFC Bank’s shares and to foray into newer segments like stressed assets and health insurance. This will be the first equity raising by India’s largest housing financier HDFC in a decade. “Our board has approved equity raising of up to Rs 13,000 crore. The last time we raised equity was in 2007. Prior to that, we had raised equity in 1994 and in 1987 as well. We are very cautious in tapping the market and this will take care of our capital needs for several years,” PTI report said citing HDFC vice chairman and chief executive, Keki Mistry.
The fund will be raised through any route, including a preferential issue, qualified institutional placement or any other permissible mode or a combination, Keki Mistry further said. “We will consider raising funds by issue of equity shares or compulsorily convertible debentures or warrants or a combination of all. The issue will be through a preferential issue or qualified institutions placement or through any other permissible mode or combination, subject to shareholder and regulatory approvals,” the company said. Keki Mistry did not give a timeline for the fundraising, saying all the details will be finalized by a committee set up by the board.
On the purpose of fundraising, Keki Mistry said the parent’s share of the capital will be used to infuse into HDFC Bank “as we want to retain our shareholding at 21% or so.” Currently, the HDFC holds 21.01% in the HDFC Bank. “Since we didn’t participate in the Rs 9,800-crore QIP issue of HDFC Bank in February 2015, our shareholding has come down to 21.01% from around 24% then. We want to maintain our ownership at that level, hence the fund infusion of up to Rs 8,500 crore,” Mistry added. The new capital will also be used to recapitalize some of its subsidiaries like HDFC Ergo General, HDFC Education & Development Services and HDFC Credila Financial Services.