HDFC to convert Bank warrants

The country’s largest mortgage lender, Housing Development Finance Corporation (HDFC), plans to exercise the warrants issued by HDFC Bank into equity. Following the conversion in early December, HDFC’s stake in the bank will rise to almost 24 per cent.

“Yes, we will exercise these warrants. Based on the current capital base of HDFC Bank, our stake in HDFC Bank will be around 23.8 per cent,” a spokesperson for HDFC said.

As of September 30, 2009, HDFC held a 19.29 stake in HDFC Bank, the country’s second-largest private sector lender.

The warrants were issued to HDFC in June last year during the merger of HDFC Bank with Centurion Bank of Punjab, to allow the mortgage lender to maintain its shareholding in the merged entity.

HDFC received 26.2 million warrants at Rs 1,530.13 per warrant on a preferential basis, adding up to Rs 4,000 crore. Of this, HDFC had to pay 10 per cent of the total amount, or Rs 400.9 crore upfront, in line with guidelines on preferential allotment. The mortgage lender has till December 2 to pay the balance amount and convert the warrants into equity.

HDFC Bank’s capital adequacy ratio (CAR), or capital as a percentage of total risk-weighted assets, was 15.7 per cent at the end of the September 2009 quarter, with Tier-I CAR at 10.9 per cent. Once the capital from the HDFC warrant conversion flows in, the bank’s CAR will rise above 17 per cent.

On June 3, 2008, the date on which the warrants were issued, HDFC Bank’s stock price was Rs 1,282.55 per share on the Bombay Stock Exchange. During the stock market bear run, the stock hit a low of Rs 774 on March 6, 2008, but regained when the markets bounced back.

HDFC Bank’s stock was trading at Rs 1,706.50 at the end of trading on the Bombay Stock Exchange on Monday, up 4.06 per cent over the previous close.

HDFC Bank’s retail loans hit 18-month high
Backed by an upturn in consumer demand and the government stimulus package, HDFC Bank has disbursed retail loans worth Rs 3,000 crore in October, the highest in about last 18 months. After a slump due to the economic slowdown last year, the bank witnessed an increase in business activity, especially in the retail segment covering auto, home, personal loans and credit cards.

Elaborating on segments where the bank saw growth, Pralay Mondal, country head, retail assets of the bank, said, the private lender disbursed about 50 per cent of loans in October for purchasing two-, four-wheelers and commercial vehicles. It has also been active in the home loan segment with disbursals of around Rs 500 crore. The bank has the option to take 70 per cent of home loans on its books.

The revival in the customer demand came in the backdrop of the economic stimulus package given by the government to contain the adverse effects of the global financial crisis, and a launch of a slew of launches, especially by automotive companies, Mondal added.

The bank expects to grow its retail loan book “faster than the industry” and has seen a major chunk of its business emerging from non-metros. For the full year, the retail credit growth is expected to be a little faster than the industry.

HDFC Bank has a retail portfolio of Rs 60,000 crore. Around 47-50 per cent of incremental advances and 32 per cent of deposits came from non-metros in October, he said.

The lender, which has a credit base of 4.5 million and a debit card base of 9 million, saw a 22 per cent rise in card spends over the last month, he added.