India HDFC Bank Seeks to Sustain Loan Growth With Share Sale

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  • Bank sidesteps bad loan issues with focus on consumer lending
  • HDFC Bank shares have climbed 57 percent so far this year

HDFC Bank Ltd. plans to raise as much as 240 billion rupees ($3.75 billion) through a share sale, as India’s most richly-valued lender seeks to boost its risk buffers and maintain the recent rapid pace of loan growth.

The board of the Mumbai-based bank approved the fund raising on Wednesday, an exchange filing showed. Some 85 billion rupees of the capital will come from the bank’s parent company, Housing Development Finance Corp., according to the filing.

Under Chief Executive Officer Aditya Puri, HDFC Bank has maintained high loan growth by focusing on consumer lending to the country’s growing middle class. HDFC Bank also has below-average bad loan ratios as a result of limiting its exposure to heavily-indebted Indian corporations.

Lowest Soured-Debt Ratio

HDFC Bank sidesteps bad-loan issues with focus on consumer lending

Source: Exchange Filing

HDFC Bank is likely to face healthy demand for the share sale, according to Asutosh Kumar Mishra, a Mumbai-based analyst at Reliance Securities Ltd. “The bank is taking money, not because it needs it, but as it is easily available right now,” he said. “The amount is enough to sustain loan growth for several years to come and will keep capital ratios at a very robust levels.”

HDFC Bank saw loan growth of 22 percent in the year to September. Its bad loan ratio stood at 1.26 percent, the lowest among the country’s largest lenders. Its price-to-book multiple of 5.27 is the highest among global banks with at least $50 billion in market value, data compiled by Bloomberg shows.

The bank’s shares have climbed about 57 percent so far this year, more than double the increase in the benchmark S&P BSE Sensex.

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