HDFC To Raise Up To Rs 13,000 Crore To Infuse Funds In Banking Arm, Acquire Stressed Assets
HDFC to raise funds through a mix of debt and equity instruments.
Housing Development Finance Corporation Ltd. said it will raise Rs 13,000 crore (about $2 billion) to infuse capital into its banking arm, explore opportunities in health insurance and acquire stressed real estate assets.
Its board approved to raise funds by issuing shares or compulsorily convertible debentures or warrants or their combination, the housing finance company said in an exchange filing. Up to Rs 8,500 crore of the funds raised will be used to subscribe to the preferential allotment of its banking arm HDFC Bank Ltd.
BloombergQuint had reported earlier that HDFC plans to raise up to $2 billion from a consortium of lenders led by private equity firm KKR and Singapore’s sovereign wealth fund GIC. HDFC’s exchange filing didn’t name any investors.
The Keki Mistry-led HDFC wants to participate in HDFC Bank's institutional share sale to ensure that its stake does not fall. Along with its subsidiaries, HDFC owns 21 percent in the bank. HDFC Bank will consider the proposal for a qualified institutional placement on Dec 20. Keki Mistry, chief executive at HDFC, said that their investments in HDFC Bank have yielded an unrealised bounty. “The unrecognised profits made only from investments in HDFC Bank have been to the tune of Rs 96,000 crore as of today,” he said at a media conference.
India’s largest mortgage lender will direct the rest of the amount raised to fund its new initiatives. It is exploring opportunities in health insurance with its subsidiary HDFC Ergo General Insurance Company.
We are not currently in health insurance. We would like to be in health insurance in a big way. We would get into that in partnership or through HDFC Ergo. But that would require a reasonably large amount of investment.Keki Mistry, CEO, HDFC Ltd.
The mortgage lender is also mulling the acquisition and resolution of stressed assets in the country’s beleaguered real estate sector. “This is something which will not happen immediately. This could happen over 2-3 years,” Mistry said addressing a media conference today. Mistry added that the real estate sector is the “core competence” of HDFC which is why it would able to take over stalled projects and get them completed. However, he said this foray is “really, really premature” right now.
HDFC set up a fund to invest in the "equity and mezzanine debt" of affordable housing projects and also has a committed sponsor to support these funds, the statement said.
HDFC said it has "adequate resources" to fund its mortgage operations currently. But "there could arise opportunities for organic and inorganic growth" in the affordable housing space that may need more capital. The corporation may also require growth capital for its subsidiaries like HDFC Education and Development Services Pvt. Ltd. and HDFC Credila Financial Services Pvt. Ltd., among others.
Shares of HDFC closed 0.5 percent lower, ahead of the announcement, in comparison to the benchmark S&P BSE Sensex that closed 0.7 percent higher.