“They started their roadshow last month and have been meeting up with investors across the world. The company plans to launch the issuance after budget," said the second person mentioned above who is involved in the process, adding the firm will use the funds primarily for expanding its core housing financing business.
DHFL has hired two domestic investment banks for the issue.
An email sent to the company on Monday evening seeking comment did not elicit any response.
The company acknowledged that it has received the email.
On 16 January, the company notified the exchanges that its board had approved equity fund raising up to ₹ 1,000 crore. The company is looking to raise another ₹ 1,000 crore through a commercial paper issue, it said in a separate notice to the exchanges on 5 February.
DHFL, the flagship company of Wadhawan Global Capital, is the second largest private sector home finance company. DHFL caters to the affordable housing segment and lends to the lower and middle income groups in semi-urban and rural markets. As on 31 December 2014, the company had assets under management (AUM) of ₹ 52,600 crore, with gross non-performing assets at 0.77% of the AUM.
On 30 January, the firm said in a stock exchange notification that it has applied for a licence for small financial bank (SFB) with the Reserve Bank of India (RBI). “The management is of the view that this conversion to Small Bank will enable the company to transform into a more robust and scalable business model," it said.
RBI had on 27 November last year, issued guidelines for setting up of small finance banks in the private sector with the objective to further financial inclusion. The minimum paid-up equity capital requirement for small finance banks is ₹ 100 crore, according to RBI guidelines.
The company has raised funds through the QIP route several times.
Last year, 33 listed companies had raised ₹ 31,684.22 crore from QIPs, according to data from Prime Database. However, several of these companies saw their stock prices decline significantly post the fund raise. So far in 2015, four companies have raised ₹ 355 crore through QIPs.
“The companies which came with QIPs in the period of April-July last year were all debt-heavy companies, where no asset creation was happening. NBFCs like DHFL or other companies in financial services sector—they will have a different kind of investor profile, capital structure as well as different requirement of funds. We have already seen a good response to the HDFC Bank QIP," said the first banker cited above. Investors are keen to invest wherever they feel that the company’s stock is undervalued; however, they might not be so keen in cases where stock prices have increased by almost two times, he added.
“Housing finance companies catering to the affordable housing segment is doing good and the government’s push in this sector has been one of the kicker for these stocks. DHFL has high cost to income at around 28% and it is investing in brand building, inorganic growth and a pan-India expansion drive, which should have a positive effect in the long run," said P. Karthikeyan, equity research analyst with Cholamandalam Securities Ltd.
“Mumbai is one of the largest markets for housing finance companies with a penetration of 28% in terms of loan book followed by TamilNadu with 18%," Karthikeyan added.
Shares of the company closed the day at ₹ 488.85, up by 5.13% on the BSE, while the benchmark Sensex closed at 28,355.62 points, up by 0.45%.