HDFC will test market with Rs 13,000 cr issue

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 that 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," said HDFC vice chairman and chief executive Keki Mistry. He said the fund could be raised through any route, including a preferential issue, qualified institutional placement or any other permissible mode or a combination. Mistry did not give a time line for the fund raising, saying that all 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 has not 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. HDFC Bank’s board will be discussing a fundraising plan at its meeting on Wednesday. Furthermore, Mistry also said the capital will be used to enter new businesses like a dedicated stressed asset resolution fund for the realty sector, and also a foray into the health insurance business. But both these proposals are at the drawing board level with just a Board approval since nothing has been finalized, he said, adding these may fructify over the next three-four years. The HDFC announcement comes within a month of rival Axis Bank announcing an over Rs 11,626 crore capital raise from private equity major Bain Capital and promoter Life Insurance Corporation (LIC), which was completed on Monday.