Housing Development Finance Corporation (HDFC) has received an in-principle nod from its Board of Directors for a combined offering of secured redeemable non-convertible debentures (NCDs) along with detachable warrants.
The issue size is pegged at Rs4,000 crore. The NCDs together with the warrants will be issued on a qualified institutional placement basis.
At Rs2,350, the stock trades at 20.8x its FY2011E earnings per share (EPS) and 4.9x its FY2011E adjusted book value (ABV).
As we await further clarity over the terms of the issue and the price at which the warrants would be issued, we keep our earnings estimates unchanged.
Consequently, we maintain our HOLD recommendation on the stock with a price target of Rs2,517.