Foreign investors are quite bullish on the Indian financial services sector, with eight out of the top 10 investors in the mortgage lender HDFC Ltd's Rs 10,000 crore equity offering being marquee institutional funds. ICICI Bank's two subsidiaries in life insurance and mutual fund spaces are the only Indian investors to figure in the top 10 list.
The global investors are lead by Government of Singapore, which put the highest amount of Rs 1,336 crore, followed by Invesco Oppenheimer ( Rs 553 crore), T Rowe Price (Rs 423 crore), Government Pension Fund Global (Rs 375 crore), Societe Generale (Rs 311 crore), Australian Super Pension Fund (Rs 240 crore), First State Investments (Rs 228 crore) and Morgan Stanley (Rs 228 crore).
There are a total of 283 investors that participated in the Rs 10,000 crore qualified institutional placement.
The mortgage lender will use the funds for the expansion plan of the subsidiaries and associate companies. HDFC's subsidiaries in the life and general insurance space are expanding at a fast pace and are keen to make acquisitions. The other subsidiaries are in the area of banking, mutual fund, education, etc.
HDFC Ltd, an entity without any promoter, is run by professionals led by Deepak Parekh. Over the last four decades, global investors have acquired a substantial stake in the country's first specialised housing finance company.
Currently, HDFC is 70 per cent owned by the foreign portfolio investors, while the domestic mutual fund industry has around 10 per cent shareholding. The insurance giant LIC owns 5 per cent plus, while the other financial institutions have the remaining shareholding.
With the current sale, the foreign investors will further consolidate their shareholding in the firm. HDFC Ltd, which is also the promoter of HDFC Bank, has a market capitalisation of Rs 3.15 lakh crore. It currently gets a price to book value of 3.67 times in the stock market.
The mortgage lender has a loan book of over Rs 5.16 lakh crore, which comprises loan to individuals, corporate, construction finance, etc, and has the lowest gross NPAs of less than 2 per cent.
Many NBFCs struggles as they scale up assets or loan book because of the disadvantage of raising low-cost deposits (savings and current) via-a-vis banks. But HDFC has managed to scale well with multiple sources of borrowings. Currently, a bulk (43 per cent ) of its borrowing comes from debentures followed by fixed deposits (32 per cent), term loans (21 per cent) and external commercial borrowings (4 per cent).
A web of successful subsidiaries also brings additional profits for the mortgage lender, which makes it a very attractive proposition for equity investors to pump in money.
Also read: Bank of China's 1% in HDFC: Should we fuss?