Housing Development Finance Corp. Ltd (HDFC) is planning to raise up to Rs13,000 crore via a qualified institutional placement (QIP) as it seeks to maintain its shareholding in its subsidiary HDFC Bank Ltd and bolster its capital base to meet the growing demand for home loans.
The fundraising will be either through fresh equity issue or convertible debentures or both, HDFC said in a stock exchange notice. The last time it raised funds through an equity issue was in 2007.
India’s largest and oldest mortgage lender will infuse Rs8,500 crore in HDFC Bank, which is launching a preferential sales of shares. Participating in this share sale will allow HDFC to maintain its 21% shareholding in the banking unit.
An HDFC Bank spokesperson declined to comment on the fund-raising programme of the bank and said its board is meeting on Wednesday.
HDFC’s fund raise will also allow the mortgage lender to grow its affordable housing and health insurance business, said Keki Mistry, its vice-chairman and chief executive.
“We will be considering inorganic opportunities in the housing finance business. The housing business offers huge growth opportunities due to under-penetration of housing and a young population. We also have an affordable housing fund that will require funding,” Mistry said.
The NBFC is also planning to venture into the health insurance business, partnering its general insurance subsidiary HDFC Ergo General Insurance Co. Ltd.
“We see massive opportunity in the health insurance space. We are currently not there in the health insurance sector and would like to get there in big way. We will do that in conjunction with HDFC Ergo General Insurance. But that would require a large amount of capital,” said Mistry.
Apart from affordable housing and health insurance, HDFC will also be exploring investment opportunities in stressed assets space.
“This will not happen immediately but over the next 3-4 years. We have expertise in real estate and it is (our) core competence and we also know that across the country, there are a few projects that are under stress. HDFC can take over those projects in half-completed stage and entrust their completion to a good developer and through HDFC brand, sell it at a higher price,” Mistry said.
He added the HDFC board has set up a committee which will meet frequently to decide the mode of fund raising and exactly how much will be invested in the bank and other businesses such as HDFC Education and Development Services Pvt. Ltd and HDFC Credila Financial Services Pvt. Ltd.
On Tuesday, shares of HDFC Ltd fell 0.49%, or Rs8.40, to Rs1,709.70, while the benchmark Sensex rose 0.70%, 235.06 points, to 33,836.74.