In a bid to create a war-chest to fund its insurance business, but without losing management control of its banking business, Housing Development Finance Corporation Ltd (HDFC) has decided to mop of Rs 3114 crore through an issue of equity shares on preferential basis to the private equity fund The Carlyle Group, and to Citigroup.
The money is being raised to meet fund requirement for the next five-year, said Keki Mistry, managing director of HDFC. The corporation will issue 1.8 crore equity shares, representing 7.11 per cent of the total issue and paid up capital at Rs 1730 per share of Rs 10 each. The price represents a 6.9 per cent premium over the average weekly high and low closing share price of HDFC over the past six months.
Of the 1.8 crore shares, 1.525 crore will be issued to The Carlyle Group. Citigroup Strategic Holdings Mauritius Ltd will subscribe to the balance of 27.50 lakh shares. After the sale Citigroup's holding will be maintained at 12.3 per cent and The Carlyle Group will hold 5.6 per cent of the equity of HDFC. In May 2006, Citigroup had acquired 9.7 per cent stake in HDFC from Standard Life for $650 million and later increased the stake to 12.3 per cent. Sources said that the Citigroup insisted for retaining its share of the stake, and hence bought the additional shares.
As the private placement became known, HDFC's share price increased by Rs 63.80, a rise of 3.64 per cent to Rs 1818.75 against the previous close of Rs 1754.95.
“We are raising resources to subscribe the preferential issue of HDFC Bank, to fund the insurance business as well as to fuel the mortgage business,” Mistry said. After the private placement, the capital adequacy ratio of the corporation will increase to 12.3 per cent from the present level of 7.6 per cent.
HDFC, which is the original promoter of HDFC BANK, has decided to subscribe 1.35 crore-equity shares of HDFC Bank to retain its stake at around 22 per cent. The bank has already announced its plan to mop of Rs 4200 crore by issuing 1.3 crore equity shares at Rs 1036.25 per share amounting to Rs 1398 crore.