HDFC Bank — India’s second-largest private sector lender — is planning to raise a whopping ₹24,000 crore of capital, the highest-ever fund raising exercise through the equity route in the domestic market.
The bank’s board cleared the proposal on Wednesday.
“... the board of directors of the bank, at their meeting held on December 20... have approved raising of funds aggregating up to ₹24,000 crore,” the bank said in a notification to the exchanges.
Infusion by HDFC
HDFC, the parent entity of HDFC Bank, will infuse up to ₹8,500 crore in the bank to maintain its stake at 22.01%. The balance ₹15,500 crore will be raised by HDFC Bank through issuance of shares, convertible securities, depository receipts pursuant to a qualified institutional placement (QIP)/American Depository Receipts (ADR)/Global Depository Receipts (GDR), the notification said.
HDFC Bank will seek approval from its shareholders in an extraordinary general meeting of the bank slated for January 19. The issuance will surpass Coal India’s offer for sale which was for ₹22,600 crore in 2015. Among banks, SBI raised ₹15,000 crore through a qualified institutional placement earlier this year, which was highest by an Indian bank so far.
HDFC Bank had last raised capital in February 2015 and HDFC had not participated in that issue.
While the bank is well capitalised with a 15.1% capital adequacy ratio as per Basel-III guidelines, it would still need capital to support its business growth as well as capital requirements arising out of advanced Basel-III norms.
Above-average growth
The bank has been consistently expanding its business growth well above the industry average. Till September 30, it recorded a loan growth of 22.3% year-on-year while the industry average growth was in single digits. Its deposits had grown 16.5% during the period.
Wednesday’s announcement by HDFC Bank came days after its competitor Axis Bank, the third-largest private sector lender, finished raising capital of ₹11,626 crore from private equity major Bain Capital and Life Insurance Corporation of India.
Many public sector banks have also raised capital recently, mainly required for provisioning towards bad loans. HDFC Bank, however, is the least affected among Indian lenders from the sharp rise in non-performing assets. The bank’s stock ended 0.9% lower on the BSE to close the day at ₹1,868.05.
