HDFC Bank’s QIP issue still awaits final NHB nod

MUMBAI: HDFC Bank, India’s most-valued lender, is likely to sell fresh shares in a qualified institutional placement (QIP) in the next few days in what will be the largest such offering in India. The bank had received Cabinet nod for the sale on June 13 and got the official government papers only on Thursday, removing a big hurdle from the issue.

It is now waiting for a clearance from the housing finance regulator National Housing Bank (NHB) to permit parent Housing Development and Finance Corp (HDFC) to subscribe to a preferential issue, which will allow it to maintain its 25.60 per cent shareholding in the bank. The go-ahead is likely to be given at the NHB board meeting later this week.

“The sale will be kicked off as soon as we get the go-ahead from NHB which could be later this week. The way the bank has performed over the years, it does not require to time the market in any way. We will be ready to price as soon as the nod is received,” said a person associated with the issue.


The issue includes Rs 8,500 crore infusion from parent HDFC which will allow it to maintain the current shareholding in the bank, leaving potentially around Rs 15,500 crore to be raised from the market, in what will be the largest QIP from India, beating the previous record of Rs 15,000 crore raised by State Bank of India in June 2017.

In other words, Rs 24,000 crore could be added to the bank’s market capitalisation closing the gap between HDFC Bank and Reliance Industries, the second most valued company on the Bombay Stock Exchange (BSE).

On Monday, Reliance ended with a market capitalisation of Rs 6.08 lakh crore, while HDFC Bank was valued at Rs 5.39 lakh crore. Information technology behemoth and the Tata Group’s crown jewel TCS is the most-valued company in India with market capitalisation of Rs 7.10 lakh crore.

HDFC Bank’s share sale is the first such sale since the bank raised Rs 10,000 crore through a combination of QIP and American Depository Receipts (ADRs) in February 2015. Share sales of the bank are tricky because bankers have to ensure that the issue does not breach the 74 per cent cap for foreign investment in the bank.

Parent HDFC’s stake is also considered foreign because it is majorly owned by foreign institutional investors.

Last time, the government took a year to give the goahead for the issue because of the sensitivities involving the bank’s foreign holding. “Like last time, even this time, the preferential issue to HDFC and QIP to institutional investors are likely to happen simultaneously. The whole thing will end in a day,” said another person closely involved in the deal.

The capital raising will enhance the bank’s capital adequacy ratio from 14.8 per cent in March 2018 and likely last the bank for the next three years.

A host of foreign banks, including Bank of America-Merrill Lynch (BofA-ML), Credit Suisse, JPMorganChase, UBS Securities, Morgan Stanley, Goldman Sachs and Nomura Holdings are vying for the issue. Domestic investment banks like JM Financial, Kotak Mahindra and Motilal Oswal could also be part of the issue.

HDFC Bank’s shares ended at Rs 2,073 per share, down 1.65 per cent on Monday even as the benchmark 30-share Sensex ended 0.45 per cent lower.