India’s second-largest private sector lender HDFC Bank successfully concluded a Rs 10,000-crore private placement to institutional investors in the US and India on Thursday. The resources will help the Mumbai-based bank bolster its capital adequacy ratio and boost lending as India aims to accelerate its economic growth.
The Aditya Puri-led bank raised $1.27 billion (R7,850 crore) by way of American depositary receipts (ADRs) based on the current exchange rate.
Additionally, the bank has raised close to R2,150 crore by way of qualified institutional placement (QIP) from domestic institutions.
The clearing price for the QIP was R1,067 per share, the company said in a stock exchange notification. Each ADR was priced at $57.76. The ADR was trading at $58.85 in early trades on the New York Stock Exchange.
The company had fixed the floor price at R1,061.84 per share, a 0.5% discount to Wednesday’s close of R1,067.25 apiece. Each ADR is equal to three shares in the bank, stock exchange data showed.
HDFC Bank’s market capitalisation will rise to R2.7 lakh crore from R2.61 lakh crore taking into account the fresh infusion and Thursday’s closing price of R1,077.25 per share. The bank will maintain its position as the fifth-largest company by market capitalisation on Indian bourses.
FE learns that ADR issue — the fourth-largest by an Indian company — was subscribed more than five times at the time of going to press. The QIP was subscribed roughly twice, sources familiar with the placement said.
People in the know said Capital Group, one of the world’s largest investment management companies
by assets, had participated in the offer.
Other foreign institutions to participate in the private placement included American multinational financial services company Fidelity Investments and Washington Mutual.
Some of the domestic institutions known to have participated in the QIP are SBI Life Insurance, ICICI Prudential Life Insurance and Birla Sun Life Insurance, among many private life insurance as well as asset management companies. However, state-owned insurance company and India’s largest domestic institutional investor, LIC gave a miss to the issue, sources affirmed. Post the issue, the promoter holding is likely to drop close to 21.63% compared with 22.47% as of the quarter ended December 2014. FII holding may rise to 73.0-73.5% from 50.59%.
DII holding is estimated to rise to 10.4% from 10.02% at the end of the previous quarter. HDFC Bank will issue a total of 86.1 million fresh shares to foreign as well as domestic institutions. Of the total, the bank will issue a little over 20.1 million shares to domestic investors and the balance 22 million depository receipts, representing 66 million shares as underlying, to American investors based on the 1:3 ratio. Thursday’s transaction by HDFC Bank was the largest share sale by a private sector entity and the second-largest fund-raising by selling shares in the secondary market after the bumper Rs 22,500-crore Coal India issue last week by the government. It was also the fourth-largest US offering by an Indian company and the largest since 2009, showed data compiled by Prime Database.
ICICI Bank, India’s largest private sector lender had in June 2007 raised $2.46 billion by offering shares on the NYSE — the biggest ADR ever by an Indian company. Sterlite Industries (India) had raised $2.01 billion in June 2007 and $1.60 billion in July 2009 on the NYSE.
In December 2013, the RBI had prevented foreign institutional investors from holding more HDFC Bank stocks after their combined stake crossed 49%. The Cabinet Committee on Economic Affairs approved HDFC Bank’s capital-raising plan on January 28 this year after the Foreign Investment Promotion Board cleared the proposal on December 19, 2014. Nine investment banks — Bank of America, Citigroup, Credit Suisse, JM Financial, JPMorgan, Morgan Stanley, Barclays Capital, Nomura, and UBS — were managing the private placement.
HDFC Bank had a capital adequacy ratio (CAR) of 15.7% as of the quarter ended September and a gross bad-loan ratio of 1%, exchange filings show. It is yet to announce financial results for the quarter ended December 2014. India’s banking system had a CAR of 12.8% as on September 30, 2015, data from the RBI show.