Housing development finance corporation (HDFC) is planning to raise $1.8 billion for the acquisition process in areas ranging from lending to insurance said by Mistry, Vice-chairman, and Chief executive officer of the country’s biggest mortgage lender. If a good acquisition opportunity comes they will never miss that opportunity said Mistry in an interview with Bloomberg Television. Previous week HDFC declared they are planning to raise Rs 140 billion ($1.8 billion) through the sale of shares or bonds. They also want the necessary capital to expand its lending business once the economic growth recovered from the decline stage due to the coronavirus pandemic.
He also expects demand in the housing market to be normal back by the end of March 2021. The new capital is raised either through the issue of equity to the institutional investors or via convertible equity. Since mortgage business is the activity of HDFC, they have subsidiaries in life and non-life insurance, education, finance, and banking sector. They might infuse a part of the newly raised capital in these subsidiaries. HDFC capital adequacy ratio stands at 16.6 % which is higher than the current regulatory minimum rate of 14% for mortgage lenders. The minimum rate for such lenders is being increased by up to 15 % by March 2022. Mistry was also quite confident about HDFC’s asset quality given improved demand for housing. The middle-income borrowers are being the major job losses. The Reserve Bank of India has permitted the borrowers to extend their loan repayment by six months until the end of August without such delays will be treated as bad loans. As of now the pandemic coronavirus and associated lockdown may push India’s total bad loan ratio by 7 % points, according to the report by Mckinsey & Co. The current liquidity ratio is 9.3% which is already the highest rate among the major world economy. Still, HDFC might be less impacted given that the volume of default loans has come down since the last month, according to the report by Macquarie Group.
