HDFC, HDFC Bank: Twinning effect!

Shares of Housing Development Finance Corporation (HDFC) retreated lower after starting Monday’s session 1% higher while that of HDFC Bank witnessed marginal gains.
Last week, both the companies received board approval for fund raising.
While the mortgage lender HDFC said its committee of directors approved raising funds up to Rs 14,000 crore, the board of HDFC Bank approved proposal to raise up to Rs 50,000 crore in the next twelve months by issuing various debt securities.

HDFC intends to augment the long-term resources of the corporation, finance organic or inorganic business opportunities, to maintain liquidity and for general corporate purposes. It is the latest to join other financial services firms to raise capital to survive the pandemic related stress that is expected to hit them.
These funds will be used to finance organic as well as inorganic business opportunities that may arise in financial services including housing finance as well as in areas where its subsidiaries operate, to maintain sufficient liquidity and for general corporate purposes of the corporation.

Though, the mortgage provider mentioned about fund raising through private placements, there is no clarity about the means or instruments it will offer. It could be secured or unsecured, listed or unlisted conversely, they could be a combination of both. This ambiguity seems to be adding pressure on the stock price.

On the other hand, HDFC Bank – the largest private sector lender revealed its plan to raise the capital through through private placement mode, in the period of next twelve months, subject to the approval of the shareholders at the ensuing annual general meeting (AGM) and any other regulatory approvals.
The bank’s 26th AGM will be held on July 18, 2020 through video-conferencing /other audio-visual means.
The fundraising clarity seems to give edge for investor decision in favour HDFC Bank.

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