Housing Development Finance Corp, the country’s largest home loan firm, said on Friday it plans to raise Rs 3,114 crores though the issuance of 1.8 crore equity shares of Rs 10 each on a preferential basis to a select group of investors to fund the growth of its subsidiaries — HDFC Bank and HDFC Standard Life Insurance Company.  This preferential issue represents 7.11 per cent of the total issued and paid-up capital of the corporation.

According to a HDFC release, The Carlyle Group through CMP Asia Ltd will subscribe to 1.525 crore shares and Citigroup Strategic Holdings Mauritius Ltd will subscribe to the balance of this issue. The shares to be issued on a preferential basis would be at a price of Rs 1,730 per equity share of Rs 10 each. This price represents a 6.9 per cent premium over the average weekly high and low closing share price of HDFC during the past six months. Post the issue, Citigroup will maintain its holding at 12.3 per cent and The Carlyle Group will hold 5.6 per cent of the equity of the corporation. HDFC will be seeking shareholder approval at the AGM scheduled to be held on June 27.

“HDFC’s loan approvals have grown consistently at 30 per cent on a 10-year compounded annual growth rate basis. In order to fund the growth of the mortgage business and to fund the rapid expansion of HDFC’s associate and subsidiary companies, namely HDFC Bank Ltd (HDFC Bank) and HDFC Standard Life Insurance Company Ltd (HDFC-SL), the Corporation needs to raise additional capital,” the release said.

HDFC currently holds 21.56 per cent of HDFC Bank. In order that HDFC as a promoter retains its shareholding in HDFC Bank at approximately the current level, the Board of HDFC Bank, subject to the requisite approvals of the Reserve Bank of India and its shareholders, has made a preferential offer to HDFC at a price of Rs 1,023.49 per share.

This investment will ensure that HDFC maintains its shareholding in HDFC Bank at 22 per cent post HDFC Bank’s proposed increase in its share capital. HDFC-SL has recorded encouraging growth over the last few years. HDFC’s shareholding in HDFC-SL is currently at 81.9 per cent. Over the next couple of years, HDFC would have to continue to contribute its share of equity to HDFC-SL to fund its growth. Investment in the equity of HDFC-SL has a direct impact on HDFC’s capital ratios.