Mumbai: HDFC Bank Ltd, India’s third biggest bank by market value, increased its US share sale to $698 million (Rs2820 crore) to fund accelerating demand for loans in an Asian economy that’s growing at its fastest pace in six decades.
HDFC Bank sold 7.58 million American depositary receipts (ADRs) at $92.10 apiece, two people with direct knowledge of the sale said. Each receipt is equal to three local shares. The bank planned to raise $600 million, it said in a filing to the Securities and Exchange Commission on 10 July.
“Banks are a proxy for the country’s economy, which is growing at more than 8% annually,” said Jayesh Shroff, who helps manage $3.7 billion in local shares at State Bank of India (SBI) Funds Management in Mumbai. “Investors who want a play on the Indian economy buy a bank stock.”
Banks are likely to gain from forecast 9% growth in the nation’s $854 billion economy in the year to 31 March.
Bank lending rose 28% last year, following average growth of 35% over the two preceding years, according to central bank data. Companies need funds to grow and financial advice to sell shares and acquire rivals.
HDFC Bank’s existing ADRs fell 0.4% to $92.26 on 17 July on the New York Stock Exchange.
The overseas share sale is part of a plan for the Mumbai- based bank to raise about $1 billion, including selling Rs1,390 crore ($345 million) of shares to its parent, Housing Development Finance Corp.
HDFC Bank, started in 1995, is about one-fifth owned by HDFC, the mortgage lender that’s 12.6% owned by Citigroup Inc.
Credit Suisse Group, JPMorgan Chase & Co., Merrill Lynch & Co., Morgan Stanley, Nomura Holdings Inc., UBS AG and Deutsche Bank Securities helped the Mumbai-based bank sell the shares, according to the sale documents.
Neeraj Jha, a spokesman for HDFC Bank, and officials at the investment banks declined to comment.
Indian banks may raise up to $10 billion in the year to March selling shares. HDFC Bank follows ICICI Bank Ltd, the nation’s biggest by market value, which raised almost $5 billion selling shares to investors in India and the US. Banks need more capital to fund accelerating demand for credit and meet new capital rules.
ICICI Bank got 11.5 times more bids than shares on offer from investors in India. Lenders such as SBI, the nation’s biggest by assets, Central Bank of India and Syndicate Bank are also planning to sell shares this year. UTI Bank Ltd is currently raising $1.1 billion.
India needs $475 billion over five years to build the roads, ports and power plants needed to sustain growth.
The economy may grow by 9% this year, the prime minister’s economic advisory council said in New Delhi on 16 July.
HDFC Bank’s shares gained 71% over the past 12 months, outpacing the 49% rise in the benchmark Sensex index. Shares lost 0.46% to Rs1,194.05 at close on the Bombay Stock Exchange on a day when the exchange’s benchmark Sensex index rose 0.07% to Rs15,301.17.
The bank posted a 34% rise in profit to Rs321 crore in the three months ended 30 June as it gave more loans to individuals and companies and as fees for selling financial products rose. Loans grew 33% to Rs53, 800 crore.