Housing Development Finance Corporation, India's leading housing finance company, will raise Rs 3,114 crore through a preferential issue to private equity investor the Carlyle Group and leading US-based financial services group Citigroup, to buy shares in its subsidiary HDFC Bank and for investing in its insurance business.
The Carlyle Group is acquiring a 5.6 per cent stake for Rs 2,638.25 crore.
HDFC will issue 15.25 million shares to The Carlyle Group at Rs 1,730 a piece through a preferential allotment. The price represents a 6.9 per cent premium over the average weekly high and low closing share price of HDFC in the past six-month period. The investment will be made by Carlyle Asia Partners.
At the same time, HDFC will issue on a preferential basis 2.745 million shares to Citigroup for Rs 475 crore, which will help Citigroup maintain its stake in the company at 12.3 per cent.
The investors have a lock-in of 18 months, against the regulatory requirement of 12 months.
"Citigroup's stake in HDFC is a passive investment. It had evinced interest in maintaining its holding in the corporation," HDFC Managing Director Keki Mistry said.
HDFC will use the proceeds of the issue to pump capital into its insurance venture, HDFC Standard Life Insurance Company Limited, maintain its majority stake in HDFC Bank and also support the mortgage business.
"HDFC's loan approvals have grown consistently at 30 per cent on a 10-year compounded annual growth rate basis. In order to fund the growth of the mortgage business and enable the rapid expansion of HDFC's associate and subsidiary companies, the corporation needs to raise additional capital," said Mistry.
While HDFC is planning to infuse around Rs 600 crore into its insurance venture, it has earmarked almost Rs 1,400 crore to maintain its majority stake in HDFC Bank.
HDFC Bank is planning to mobilise around Rs 4,200 crore through an overseas issue. This capital issue will see the HDFC stake come down from the current 21.56 per cent.
Hence, HDFC Bank has decided to make a preferential issue of 13.5 million shares to HDFC at Rs 1,023.49 apiece. This investment will ensure that HDFC maintains its shareholding in HDFC Bank at 22 per cent.
At the Bombay Stock Exchange, the HDFC scrip ended the day 3.64 per cent up at Rs 1,818.75, as against its previous close of Rs 1,730.
