MUMBAI: The board of Housing Development Finance Corporation has approved a proposal to raise Rs 3,000 crore by selling 5 per cent equity shares to institutional investors, to maintain its stake in HDFC Bank and to foray into health insurance, affordable housing and stressed real estate.
The money will be raised through qualified institutional placement (QIP) and preferential issue or other modes, the company said on Tuesday.
HDFC plans to get into health insurance either in partnership with HDFC Ergo or through acquisitions. It's looking at options including acquiring an existing company and starting a company, officials said.
"We have board approval for investing a maximum of Rs 8,500 crore in HDFC Bank to maintain our stake at 21.01% depending upon the amount of stock options, price at which bank does the issue," said Keki Mistry, chief executive at HDFC. "We see massive growth in the health insurance space where we are currently not present."
HDFC is looking to invest in equity and mezzanine debt of affordable housing projects.
It is also looking at opportunities in the acquisition and resolution of stressed assets in the real estate sector. "Real estate is our core competence and we understand housing and real estate," said Mistry. "All over the country there are few projects under stress, we can take over those projects and work towards completion."
In February 2015, when HDFC Bank raised its last round of funds, HDFC did not participate and its shareholding in the private bank fell to 21 per cent from 24 per cent . "Our unrecognised profits only on HDFC Bank is to the tune of Rs 96,000 crore," said Mistry.
All the other investments put together, the amount is well above Rs 1.3 lakh crore.
HDFC Board Okays Raising Rs 13,000 Crore
HDFC plans to use some part of the fund to invest in subsidiaries like HDFC Credila, HDFC Ergo and HDFC Capital Partners, and towards inorganic growth in the housing finance business.
"There is massive opportunities for growth in housing finance because of the low penetration and young population," Mistry said.
In the past, HDFC had raised funds in 1994 and 2007, and warrants later. "Most of the money we have raised has gone towards maintaining our stake in HDFC Bank," said Mistry. "We will not need to raise capital for several years now."
On Wednesday, the board of HDFC Bank will meet to consider issue of securities through a QIP, American Depository Receipts programme, preferential allotment or other method. It will also consider the preferential issue of shares to HDFC. Shares of HDFC fell 0.49 per cent to Rs 1,709.70 on Bombay Stock Exchange on Tuesday.
Many banks have raised funds through institutional share sale. While State Bank of India raised Rs 15,000 crore Kotak Mahindra Bank raised Rs 5,803 crore.
Many public sector banks have become active after the government announced Rs 2.11 lakh crore recapitalisation programme over the next two years to support state-run banks facing the high non-performing loans. The plan includes issuing recap bonds of Rs 1.35 lakh crore and another Rs 58,000 crore by diluting the government's stake.
Banks are taking advantage of the buoyant secondary market and liquidity in the system. Post the announcement of the package, Dena Bank, Union Bank, Bank of Maharashtra and Punjab National Bank have raised funds.
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