HDFC Bank will discuss a major fund-raising plan today, after its parent HDFC Ltd yesterday approved a separate Rs 13,000 crore funding exercise, primarily to invest in the bank.
In what could be a major boost to HDFC Bank’s capital base, India’s largest lender is scheduled to discuss a mammoth fund raising plan today. Yesterday, the bank’s parent HDFC Ltd approved raising as much as Rs 13,000 crore through equity or convertible instruments, in order to invest up to Rs 8,500 crore in HDFC Bank to maintain its current shareholding. “The board of Directors of HDFC Ltd at its meeting held accorded the approval for raising funds by issue of equity shares and/or other permissible securities up to an aggregate amount Rs 13,000 crore,” HDFC said in a press release on Tuesday.
The capital raised from the mega-fundraising plan will be utilised in buying shares of HDFC Bank for an amount worth Rs 8,500 crore via preferential issue. HDFC Currently holds about 21.02% of the paid-up equity share capital of HDFC Bank. The parent had also specified yesterday that it is buying shares of HDFC Bank “in order for Corporation to more or less maintain its current shareholding in HDFC Bank’s preferential offer up to an amount not exceeding Rs 8,500 crore.”
Back of the envelope calculations show that his gives HDFC bank room to raise up to Rs 40,000 cr if the fund-raising is done in the same proportion as the current shareholding. Earlier, news reports had suggested that HDFC Bank is looking to raise $3-4 billion.
According to a Times of India report, private equity firm KKR and Singapore government’s investment arm GIC are understood to be in talks with HDFC for a $2-billion equity investment through a preferential placement of shares. “The funds are being raised by HDFC to maintain its stake in HDFC Bank which is seen to be raising over $2.5 billion through equity issuance,” the newspaper report said.
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. Financial Express reported an investment banker as saying, “Many banks have raised large amounts in the past, and I think HDFC Bank will also raise a sizeable figure this time.”
“ Maybe, they are seeing some amount of opportunity in promoting new businesses. Of course, they are monetising existing businesses also from the books but they may probably get some opportunity in promoting new businesses and I am sensing that these companies are raising money when the market is good,” Deven Choksey told ET Now adding that the bank maybe looking to capitalise on the gains of a higher valuation.