HDFC Bank's CAR to increase to 14 per cent post capital infusion
21 May 2007
HDFC
Bank is looking at a 25 per cent loan growth rate, for
the funding of which it needs to raise capital, reports
CNBC-TV18. Its board had on Thursday approved raising
capital of Rs4,200 crore (approximately $1 billion).The bank has decided to make a preference issue of 1.35 crore shares to HDFC, at Rs1,023.49 per share. The move will reduce the promoter HDFC stake below the current level of 21.5 per cent.
The
board has also decided to issue 1.35 crore-preference
shares to HDFC so as to raise its stake to 23 per cent
of the enlarged capital base. The share issue to HDFC
will net the bank Rs 1,381 crore. The balance Rs 2,819
crore will be raised through a domestic public issue
or a global issue, the bank said.
Post equity dilution, HDFC Bank can raise up to $660 million from the domestic or overseas market. There is still a lot of headroom available to promoters after the preferential allotment to raise that entire amount through a secondary ADS offering.
Analysts
see a dilution in equity but in the short-term the return
on equity, which normally hovers between 21-23 per cent
for HDFC Bank, will come down to nearly 17-18 per cent.
But as the capital starts getting utilized, the RoE
will go up to 21-22 per cent.
The
Tier-1 capital adequacy ratio, which stands at around
8.6 per cent, will go up to 14 per cent post this capital
infusion and this is enough to take care of its growth
for the next two-to-three.