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HDFC Bank's India Offer Oversubscribed, Raises Rs 10k Cr

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HDFC Bank's $324 million share offering in India was more than 4 times oversubscribed, according to bankers and investors, a strong reception that is expected to encourage a rush of domestic equity sales from other companies.

Country's largest lender by market value on Thursday (5 January) raised Rs 9,880 crore in the largest share sale in the secondary market by a private entity to overseas and domestic investors through a mix of qualified institutional placement and American depository shares.

Merchant bankers said the issue has been successfully closed and the final pricing is expected shortly.

According to merchant bankers who include Barclays, JM Financial, Citi, JP Morgan and BofA-ML among others, said the bank opened the QIP issue first and the ADR was launched a few hours later.

The bank had plans to raise Rs 2,400 crore from QIP and the rest (up to $1.3 billion) from ADRs, but sources said the composition got changed after the sale began.

The HDFC Bank counter was trading up over 1 per cent at Rs 1,079.65 on the BSE at 1220 hrs.

This is the largest share sale by a private sector entity and the second largest fund raising through by selling share in the secondary market after the bumper Rs 22,500 crore Coal India issue last week by the government.

The Mumbai-based bank had opened the sale process without a roadshow late yesterday.

Last month, the government had allowed increasing foreign holding in HDFC Bank. The application was pending for over a year.

Parent HDFC holds 22.47 per cent in the bank, FIIs 33.75 per cent, ADRs/GDRs 16.84 per cent and the rest is held by others, as of the September quarter.

With over Rs 2.6 trillion market capitalisation, HDFC Bank trumps all other lenders in the country including SBI and ICICI.

In December 2013, the Reserve Bank had prevented FIIs from holding more HDFC Bank stocks after their combined stake crossed 49 per cent.

HDFC shares rose as much as 2.4 percent on Thursday after the sale, which is intended to provide the lender with a buffer for an expected acceleration in Indian credit growth.

The strong reception is likely to spur others, as Indian corporates rush to take advantage of a robust equity market. Tata Motors Ltd last month announced an up to Rs 7500 crore ($1.2 billion) share sale, while State Bank of India has plans to raise up to Rs 15000 crore.

The government is also in the midst of selling stakes in state-run companies to meet its fiscal deficit target this year.

Analysts say most companies are likely to opt for qualified institutional placements (QIPs), or quick share sales of already listed companies, given they are fast and have less regulatory restrictions than other forms of public offers.

"One can expect a revival in IPO markets but QIPs issuance may outpace that, given the ease of process and institutional demand for Indian paper," said V Jayasankar, senior executive director and head of equity capital markets at Kotak Investment Banking.

Of the six equity capital market fundraisings this year, three have come in the form of QIPs, according to Thomson Reuters data.

The offerings could prevent stronger gains in stock prices, as the market is flooded with paper, but analysts were hopeful that the impact would be limited, at a time of investor optimism sparked by the government's pledge of economic reforms and the central bank's efforts to control inflation.

Indian shares hit a series of record highs last month and have gained around 5 percent this year, after already gaining around 30 percent last year.

"Revival in primary market would compete for liquidity with secondary shares but given the strong underlying change in the economy, it shouldn't be an issue for India," said U.R. Bhat, managing director at Dalton Capital, a unit of British-based investment management firm Dalton Strategic Partnership LLP


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