Hdfc Bank To Use Ads Proceeds To Fund Organic Growth

HDFC Bank plans to utilise the proceeds of $172.5 million American depository shares issue to fund organic growth. It is planning to rapidly expand its business on all fronts -- branches, ATMs, asset side of the business -- over the next three to 12 months.

HDFC Bank managing director Aditya Puri said: "The capital adequacy ratio of the bank after the issue has increased from around 10 per cent to 16 per cent. The capital raised will be utilised to fund growth. If we are to grow at 25 per cent every year we would be utilising around 1.5 per cent of the capital raised every year. We will need additional capital in three years." He points out, "Once you have raised capital, you cannot keep going back into the market again and again."

 

He added that the bank is not sitting on a cash pile and there is no cash on the balance sheet. "The funds have already been deployed," Puri said.

The bank had raised $172.5 million by way of American depository shares (ADS)-- $150 million on July 20, 2001 and the greenshoe option of` $22.5 million on July 24. The share capital of the bank after the ADS has increased by Rs 37.42 crore and reserves have increased by Rs 742.92 crore.

On takeovers, Puri said: "We will look at a takeover if any opportunities arise. Currently there is no bank which is available. We will pick the right candidate at the right price. It has to be somebody who will not hamper our organic growth and also have a high deposit base per customer."

Puri added: "HDFC Bank is looking at rapidly expanding its business in the next three to 12 months. We will be expanding on all fronts -- branches, ATMs, supply chain management, credit card business and the assets side of the business. Banks normally follow the rule of expansion, consolidation and then expansion. If banks expand too rapidly this could create service related, and other problems."

The bank had last month acquired a Rs 100 crore retail portfolio from ICICI. "We are looking at picking up more retail assets. We will be interested if someone offers us a good rate," says Puri.

Public sector bank have been on an overdrive -- specially in the retail sector -- in the past few months. "There is enough market for growth. Around 60 per cent of the public sector banks have become aggressive. These are good changes. However, even if these changes take place, there are some public sector banks which are not expanding," said Puri.

According to Puri, the retail market is growing at 10 per cent. "If you can give good service, you can increase the market share by a higher rate," he said.