HDFC plans Rs3,114-crore preferential issue to Citi, Carlyle

25 May 2007

The board of directors of HDFC, at its meeting held on May 25, recommended the issue of 1.8 crore equity shares to the Carlyle Group through CMP Asia Limited which will subscribe to 1.525 crore shares and Citigroup Strategic Holdings Mauritius Limited which will subscribe to the balance of this issue.

The preferential shares would be issued at a price of Rs1,730 per equity share of Rs10 each. This price represents a 6.9 per cent premium over the average weekly high and low closing share price of HDFC during the past six months period.

Post the issue, Citigroup will maintain its holding at 12.3 per cent and The Carlyle Group will hold 5.6 per cent of the equity of the corporation.

The aggregate amount to be raised by the corporation through the proposed preferential issue would be Rs3,114 crore. The preferential allotment is in accordance with Chapter XIII of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 and is subject to shareholder approval at the ensuing annual general meeting to be held on June 27, 2007.

HDFC''s loan approvals have grown consistently at 30 per cent on a 10-year compounded annual growth rate basis. In order to fund the growth of the mortgage business and to fund the rapid expansion of HDFC''s associate and subsidiary companies, namely HDFC Bank Limited (HDFC Bank) and HDFC Standard Life Insurance Company Limited (HDFC-SL), the corporation needs to raise additional capital.

HDFC currently holds 21.56 per cent of HDFC Bank. In order that HDFC as a promoter retains its shareholding in HDFC Bank at approximately the current level, the board of HDFC Bank, subject to the requisite approvals of the Reserve Bank of India and its shareholders, has made a preferential offer to HDFC at a price of Rs1,023.49 per share. This investment will ensure that HDFC maintains its shareholding in HDFC Bank at 22 per cent post issue.