HDFC will be raising over Rs 10,000 crore by a simultaneous issue of non-convertible debentures (NCDs) alongwith warrants. Speaking to CNBC-TV18, Keki Mistry, Vice Chairman & CEO, HDFC, says the proceeds from the NCDs issue will be used for its lending business in the short-term.
Mistry adds the home-lender will issue 3.65 crore warrants for Rs 14 each with an exercise price of Rs 1,475 per share.
"Shareholders can convert these warrants anytime over the next 3 years," he adds.
The NBFC cut its bases rates on late-Monday by 25 basis points (bps) to 9.65 percent.
On the stake held by the firm in HDFC Bank, Mistry says HDFC will maintain its 20 percent stake as that is the threshold limit.
Below is the verbatim transcript of Keki Mistry’s interview with Ritu Singh.
Q: How the mortgage lender will deploy the funds raised?
A: The issue was a combined issue of a warrant cum non-convertible debentures (NCD). So, through the NCD route we have raised a total of Rs 5,000 crore and then along with the NCD there is a warrant attach to it. So, every NCD has a face value of crore and every NCD has 7,300 warrants attached to it. A warrant holder can come to us any time in the course of the next three years and buy one share of HDFC by paying us at that point of time a total price of Rs 1,475 a share.
That Rs 1,475 is an addition to the Rs 14 that has already been paid on the warrant. So, it gives us money today through our NCD and it gives us capital at a future date three years later which is probably the time when we could look at raising more capital.
Q: How are you planning to deploy these funds, the Rs 10,000 crore odd that you would have raised at the end of the exercise?
A: At the moment we have just raised Rs 5,000 crore. So, Rs 5,000 crore is ongoing money that we required for our day to day disbursements. If you look at the disbursement needs, every month our disbursements figure is much more than the amount that we have raised. So, it just gets deployed in disbursements.
However, in future when the capital comes in, the capital could be used for variety of purposes. One, as the growth continues in the system, hopefully over the next three years we will continue to grow in line with the kind of growth we have had in the past, hopefully. If that happens it consumes some amount of capital.
HDFC Bank could theoretically look at doing another issue maybe three, four, five years later. At which point of time if we have capital that gives us stability not to get diluted further, so there are various uses that we will hive off the capital. However, today what we have got is not the capital. What we have got is only the warrant at a low interest rate.
Q: I wanted to know about you hiking stake in the bank? At what level will you look at?
A: We have always said that 20 percent is the threshold level below which we are not able to account the profits of a company. This is accounting rules, so we would like our stake in the bank to go below 20 percent.
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