The board has not fixed the quantum of the money to be raised, HDFC vice chairman Keki Mistry said
Mumbai: The pureplay mortgage lender HDFC on Tuesday announced a Rs. 13,000-crore fund raising plan which will be ploughed primarily into maintaining its holding in its banking arm and enter newer segments like stressed assets and health insurance. This will be the first equity raising by the country’s largest pure-play mortgage lender in a decade, officials said, adding a bulk Rs. 8,500 crore will be used to maintain the parent’s stake in HDFC Bank at 21 per cent in an upcoming fund raising round.
“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,” HDFC vice chairman and chief executive Keki Mistry told reporters here this evening. He said the fund will be raised through any route, including a preferential issue, qualified institutional placement or any other permissible mode or a combination. He did not give a time line for the fund raising, saying all the details will be finalized by a committee set up by the board.
The board has also not fixed the quantum of the money to be raised, he said, adding the company hasn’t spoken to any investors so far, so it may not be a preferential issue as it has to be completed within 15 days of the board approval and exchange notification.
“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.
On the purpose of fund-raising, he said the lion’s share of the capital will be used to infuse into HDFC Bank “as we want to retain our shareholding at 21 per cent or so.” Currently the parent holds 21.01 per cent in the 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 per cent from around 24 per cent then. We want to maintain our ownership at that level, hence the fund infusion of up to Rs. 8,500 crore,” Mistry said.
HDFC Bank board will be discussing a fundraising plan at its meeting tomorrow. The HDFC announcement comes within a month of bad-loans saddled Axis Bank announcing an over Rs. 11,626 crore capital raise from private equity major Bain Capital and promoter LIC, which was completed yesterday.
Mistry said the capital will also be used to enter new businesses like a dedicated stressed asset resolution fund for the realty sector, and also make a foray into the health insurance business.
“Fund will also be used to set up a fund for investing in the equity and mezzanine debt of affordable housing projects,” he said.
But both these proposals are at the drawing board level with a just board approval since nothing has been finalized, he said, adding these may fructify over the next three-four years. Mistry was quick to add that HDFC will not look at any of the stressed assets at the various NCLTs now, saying “that is not our forte”.
He clarified that the stressed asset buys will be done on its own books and the company is not looking at floating an asset reconstruction company. For health insurance business,HDFC is open to acquisitions, he said, adding inorganic growth options are also open in its flagship mortgage lending ares “considering the huge potential for housing in the country and the millions of young people who are earning well to own a house.”
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. But he ruled out taking the general insurance arm public as they did with the life insurance arm recently.
Mistry said the unrealized profit from various HDFC arms runs into over Rs. 1.2 lakh crore, of which Rs. 96,000 crore is of HDFC Bank alone. The HDFC shares, which is mostly owned by foreign funds to the tune of 76-77 per cent closed down 0.49 per cent today on the BSE at Rs. 1,709.70 against an index rally of 0.70 per cent.