HDFC unlikely to dilute stake in HDFC Bank before NHB deadline
Home finance leader HDFC has said that it could miss the 2009 deadline set by regulator National Housing Bank (NHB) for pruning the capital market exposure.
By ET Bureau |
MUMBAI: Home finance leader HDFC has said that it could miss the 2009 deadline set by regulator National Housing Bank (NHB) for pruning the capital market exposure. NHB, which gives refinance to home loan companies, has laid down that no lender can have capital markets exposure (fund as well as non-fund) in excess of 40% of its net worth as on March 31 of the previous year. NHB���s capital market exposure norms are based on the prudential norms that RBI prescribes for lending institutions that it regulates. Each time RBI has tightened capital market exposure norms, NHB has followed suit.
According to regulatory sources, almost every housing finance company is an arm of a major institution. ���HDFC is the only case where the housing finance company is a holding company for various financial services business. The regulator has given it time to comply with guidelines to ensure that it is not in violation. But the corporation will have to come out with its plans,��� said a source close to the regulator.
In the past, HDFC had said that an ideal situation would be one where it could have a holding company structure where shares of all group companies ��� HDFC Bank, HDFC Standard Life Insurance, HDFC Mutual Fund, HDFC Ergo General Insurance and the housing finance business ��� would be held by a listed holding company. However, present regulations do not allow such a structure.
���Within the overall ceiling, direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and all exposures to venture capital funds should not exceed 20% of our net worth. We expect that our total capital markets investment will remain in excess of this ceiling, principally as a result of our investments in HDFC Bank, as we are a promoter of HDFC Bank,��� said the corporation in its offer document for its qualified institutional placement (QIP) issue.
In its offer document, HDFC also said NHB has given it time for fulfiling the exposure norms. ���However, there can be no assurance that such time extensions or exemptions will be granted in future. If an exemption is not granted, this could have a material adverse effect on our business, our future financial performance and the price of the NCDs, the warrants and shares,��� said HDFC. The capital market exposure limit has come down, following an increase in HDFC���s net worth. But the exposure could again increase if HDFC invests more in the bank.
According to regulatory sources, almost every housing finance company is an arm of a major institution. ���HDFC is the only case where the housing finance company is a holding company for various financial services business. The regulator has given it time to comply with guidelines to ensure that it is not in violation. But the corporation will have to come out with its plans,��� said a source close to the regulator.
In the past, HDFC had said that an ideal situation would be one where it could have a holding company structure where shares of all group companies ��� HDFC Bank, HDFC Standard Life Insurance, HDFC Mutual Fund, HDFC Ergo General Insurance and the housing finance business ��� would be held by a listed holding company. However, present regulations do not allow such a structure.
���Within the overall ceiling, direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and all exposures to venture capital funds should not exceed 20% of our net worth. We expect that our total capital markets investment will remain in excess of this ceiling, principally as a result of our investments in HDFC Bank, as we are a promoter of HDFC Bank,��� said the corporation in its offer document for its qualified institutional placement (QIP) issue.
In its offer document, HDFC also said NHB has given it time for fulfiling the exposure norms. ���However, there can be no assurance that such time extensions or exemptions will be granted in future. If an exemption is not granted, this could have a material adverse effect on our business, our future financial performance and the price of the NCDs, the warrants and shares,��� said HDFC. The capital market exposure limit has come down, following an increase in HDFC���s net worth. But the exposure could again increase if HDFC invests more in the bank.
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