HDFC Raised Rs 5000 Crore via NCDs

The board of HDFC (Housing Development Finance Corporation ), the largest mortgage lender, today approved a proposal for offering secured redeemable Non-Convertible Debentures (NCD) upto Rs. 5,000 crores with warrants having a conversion period of five years, taking all risk factors into consideration. The conversion of these warrants will result in an equity dilution of 2.20 per cent. The company will use these funds in the coming 2-3 years for the key purposes by HDFC, as it is not needed immediately. A part of raised capital will be used to meet HDFC's business requirements. The housing finance company may also use the funds to up its stake in HDFC Bank to the pre-QIP issue holding. Last year HDFC bank raised Rs 10,000 crore via QIP (Qualified Institutional Placement). The fund raising was aided by government's clearance for foreign investors to invest in the bank. The funds raised through the offering was used to expand the bank's lending business.

The merger talks between HDFC bank and housing finance giant HDFC, have been around for a long period. However, if the merger were to  happen then it would be the country's second largest financial sector institution after state-run SBI. However, some regulatory issues need to be resolved so as to make the merger more beneficial. As the Vice-Chairman and CEO, Keki Mistry has previously said that a merger is possible 'theoretically' and it would be done at an appropriate time. A merger will also ensure the merged entity is able to meet many banking guidelines such as the one pertaining to promoter shareholding. For long term benefits, it's a good opportunity for investors to invest in these organisations.