In a move that fuelled speculation of HDFC Bank merging with its parent HDFC Ltd, the former is set to raise Rs 4,200 crore ($1 billion) from either the domestic or international market. Its board has approved additional capital raising at its meeting on Thursday.
A part of the additional capital will be issued to the parent Housing Development Finance Corporation (HDFC) in the form of preference shares to enable and enhance the latter’s holding to 23 per cent.
A preferential issue of around Rs 1390 crore will be offered to HDFC Ltd. “With a view to maintaining the shareholding of the promoter group at or about 23 per cent of the enhanced capital base, it is proposed to offer to the promoter group by way of preferential offer, 1,35,82,000 equity shares of Rs 10 each to Housing Development Finance Corporation Ltd at an issue price of Rs 1023.49 per share,” the bank said in a notification to stock exchanges.
The balance capital will be raised either through domestic public offering, or through public or private offerings in one or more international markets. The parent HDFC group is holding 21.56 per cent in the bank at present.
The market does not rule out the possibility of using the additional resources raised for meeting the reserve requirements in merger with its parent, HDFC. Vishal Goyal of Edelweiss Securities said, “There is a definite possibility of using the public issue funds for merger as well.”
If the HDFC has to be merged with the bank in reverse merger then the banks has to meet the reserve requirements as applicable to banks for the entire deposit base. Being a housing finance company, HDFC does not have to adhere to statutory liquidity ratio (SLR) and cash reserve ratio (CRR).
However, the bank spokesperson said, “it is a plain fund raising exercise for meeting Basel-II requirements. The bank may opt for the best possible option or a cobination of options for rasing Rs 2,800 crore from the public.”
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