HDFC converts warrants with equity shares, investors gain

India's largest mortgage lender HDFC on Monday successfully completed the conversion of warrants at around Rs 5.5 crore with equity shares. Every warrant holder had a right to exchange warrants with one equity share of the lender but with an additional payment (or conversion price) of Rs 600 per equity share.

Earlier, warrants were issued at Rs 55 each. This essentially means, a warrant holder has paid Rs 655 (Rs 55 + Rs 600) for one equity share, which is currently trading at a higher price in the secondary market. HDFC shares on Monday closed at Rs 741 on NSE. Hence, a conversion from warrants to equity shares was a profitable option for investors. All most all warrants were converted barring a few holders (only 0.05%), whose warrants now stand lapsed.

"In terms of the said issue, HDFC issued Zero Coupon NCDs aggregating to ` 4,000 crores, out of which NCDs worth ` 2,000 crores were redeemed in August 2011 and the balance ` 2,000 crores were redeemed in August 2012. The proceeds of the said Zero Coupon NCDs were utilized to subscribe to the preferential allotment of equity shares offered by HDFC Bank Limited," HDFC said in a release.

In August 2009, HDFC had made a composite issue of warrants with non-convertible debentures (NCDs) of Rs 10 lacs each, to qualified institutional buyers (QIBs) on a qualified institutions placement (QIP) basis.

"Pursuant to the exchange of the Warrants, the Corporation issued and allotted 5,47,43,150 equity shares of Rs 2 each and realised an amount of Rs 3,284.59 crore, representing 99.95% of the Warrants issued. As of date, the paid-up equity share capital of HDFC is Rs 307.61 crore and the balance in securities premium account stands at Rs 9,297.14 crore,” the release said.

The proceeds from the exchange of Warrants will be utilized to replace the Zero Coupon Bonds and consequently the Corporation will not earn any additional interest income on the amounts raised.