HDFC gets two more years to comply with mkt exposure norms

The country's largest housing finance firm, HDFC, can now breathe a little easy as it has got two more years from the regulator National Housing Bank to comply with norms to bring down its exposure in capital markets to 40 per cent of its net worth.

Earlier, the company's had time till December 31, 2009 to meet the guidelines.

Sources said the regulator has recently extended the time period by two years for HDFC to comply with the 40 per cent capital market investment norm.

As per the NHB guidelines, the aggregate exposure of a housing finance company to the capital market in all forms (both fund-based and non-fund based) should not exceed 40 per cent of its networth as on March 31 of the previous year.

Networth of HDFC stood at Rs 13,137 crore at the end of March 2009.

Within this 40 per cent ceiling, direct investment in shares, convertible bonds/debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds of the housing finance company should not exceed 20 per cent of its networth, according to the guidelines.

The housing finance company had 23.8 per cent stake in HDFC Bank.

HDFC, in its preliminary placement document for raising resources through NCDs and warrants, had admitted that "we may not be in compliance with certain regulations concerning exposure to capital market investments".

It had said we expect that our total capital markets investment will remain in excess of this (regulatory) ceiling, principally as a result of our investments in HDFC Bank as we are the promoter of HDFC Bank.

"NHB has granted us time for such compliance concerning our exposure to capital market investments. However, there can be no assurance that such time extensions or exemptions will be granted in the future."

Further, the company had said that if an exemption was not granted, it could have a material adverse effect on its business, its financial performance and the price of the NCDs, the warrants and the shares.