HDFC, bank arm to raise Rs 33,000 crore

HDFC and its banking arm will raise about Rs 33,000 crore to fund its growth plans for the next decade. While HDFC Board has already approved a fundraising plan where the housing finance major will raise Rs 13,000 crore, the HDFC Bank Board is meeting today to approve its fundraising plan. According to a source close to the development, "The bank may seek a Board approval for raising over Rs 20,000 crore to fund its expansion for the next few years."

HDFC, which is in the market to raise funds for the first time in nearly a decade -- the last time was in 2007, will utilise the money to set up a real estate stressed asset fund or company and also start a health insurance company, besides retaining its stake of a little over 21% in HDFC Bank.

Keki Mistry, vice chairman and chief executive officer, HDFC Ltd, told DNA Money, "We are raising money with a long-term vision in mind. While about Rs 8,500 crore will be utilised to maintain our stake in HDFC Bank, we will also look at having a stressed asset fund or a company for the real estate sector and a health insurance company, among other things."

HDFC Bank's Board had informed the exchanges last week that it will meet on December 20 to consider a proposal for raising of funds through issue of equity shares or depository receipts. In addition to various forms of domestic issuance, the bank has also included issue of American Depository Receipts as an option and a preferential allotment to its parent HDFC subject to regulatory approvals.

HDFC will utilise about Rs 8,500 crore of the funds it is raising to maintain its 21.02% stake in the bank, when the banks come in the market to raise funds. HDFC had not participated in the last equity issue of HDFC Bank in February 2015.

The Board of HDFC approved a fund raising plan of Rs 13,000 crore to participate in the fund raising plan by its banking arm HDFC Bank. HDFC will consider raising funds by the issue of equity shares or compulsorily convertible debentures or warrants or a combination thereof. The issue will be through a preferential issue or qualified institutions placement basis or through any other permissible mode or combination thereof, subject to necessary shareholder and regulatory approvals.

"We are only in the preliminary stage. We have not decided on the kind of instrument that will be used for the fundraising for HDFC. But there are a number of investors interested to participate, we have to evaluate all options," Mistry said.

HDFC said in a release the key objectives of raising capital are participating in the preferential issue of HDFC Bank.

HDFC, together with its wholly owned subsidiaries, holds 21.01% of the paid-up equity share capital of HDFC Bank. HDFC Bank proposes to raise further capital to fund its growth. In order for the HDFC to more or less maintain its current shareholding in HDFC Bank (post dilution as a result of outstanding stock options), it will need to participate in HDFC Bank's preferential offer up to an amount not exceeding Rs 8,500 crore, subject to approvals.

"The Corporation is exploring opportunities in the health insurance sector in collaboration with its subsidiary, HDFC ERGO General Insurance. It is evaluating opportunities in the acquisition and resolution of stressed assets in the real estate sector. The Corporation has set up funds for investing in the equity and mezzanine debt of affordable housing projects. The Corporation has committed sponsor support to these funds," HDFC said in a release.

EXPANSION PLANS

• HDFC will utilise the money to set up a real estate stressed asset fund or company
   
• It will consider raising funds by the issue of equity shares or compulsorily convertible debentures or warrants