HDFC to raise ~14,000 cr, fixes ~1,838 as floor price for QIP

Mortgage lender will use part of capital to fund inorganic opportunities and investments in existing group businesses

Housing Development Finance Corporation’s (HDFC’S) Qualified Institutional Placement (QIP) for equity shares opened for subscription on Wednesday with a floor price of ~1,838.94 per share. It is looking to raise ~14,000 crore of equity capital.

HDFC might offer a five per cent discount on the floor price. Its share closed almost flat at ~1,776.9 per share on the benchmark BSE Sensex.

The mortgage lender is also looking to raise ~9,000 crore through secured non-convertible debentures.

The company will use part of fresh capital for funding inorganic opportunities and investments in existing group businesses. It is also looking at setting up a real estate fund in collaboration with other investors to finance stressed projects.

The fund raising by HDFC comes within a day of Axis Bank launching its QIP to raise around ~10, 000 crore. The floor price set by the bank is ~442.19 per share. According to the terms of the deal, the base deal size is up to ~8,000 crore, with an option to upsize an additional ~2,000 crore.

HDFC’S capital adequacy ratio (CAR) was 17.6 per cent, of which tier-i capital was 16.5 per cent and tier-ii capital was 1.1 per cent, in financial year 2019-20 (FY20). The investment in HDFC Bank has been considered as a deduction in the computation of tier-i capital.

During the year, the National Housing Bank amended the capital adequacy requirements for housing finance companies (HFCS). Accordingly, the minimum stipulated CAR for FY20 was increased from 12 per cent to 13 per cent and the minimum tier-i capital was increased from 6 per cent to 10 per cent.

In addition, NHB has also stipulated that the minimum CAR for HFCS would increase to 14 per cent by March 31, 2021, and 15 per cent by March 31, 2022. In 2018, HDFC had raised ~13,000 core through equity offering. Out of that, ~8,500 crore were infused in the country’s largest lender HDFC Bank.

The mortgage lender reported a pre-tax profit of ~3,607 crore in the first quarter of FY21 (Q1FY21), against ~3,985 crore in Q1FY20 on additional provisioning for pandemic-related uncertainties and a negative carry due to higher liquidity.