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HDFC Bank may issue ADRs in July

HDFC Bank, India's second-largest private bank, is likely to issue American Depository Receipts in July, industry sources familiar with the issue said on Wednesday.

Last week, the government cleared a proposal by the bank to raise $150 million by issuing ADRs.

HDFC Bank will be the second Indian bank to seek a listing in the US ICICI Bank, India's largest private bank, listed on the New York Stock Exchange in March 2000.

"Hopefully the issue should take place within a few weeks. The confidential filing has already been done," an industry source told Reuters.

"The roadshows will start as soon as the Securities and Exchange Commission gives its okay."

Officials in the bank declined to comment.

The sources said that the bank will launch the issue after September, when the US holiday season ends, if the permission does not come through in July.

The Indian government has allowed the bank, founded by the country's largest mortgage firm Housing Development Finance Corporation, to retain oversubscriptions up to 15 per cent of the total issue size.

HDFC currently holds 28.1 per cent in the bank. After the ADR issue, the total foreign direct investment in the bank will rise to 26.53 per cent from 20 per cent but will still be well within the permitted foreign holding cap of 49 per cent.

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Analysts say the bank, among the better performing in the sector due to a strong loan portfolio, is raising capital to fund future mergers and boost growth.

The ratio of the bank's gross non-performing, or sticky, loans to total advances was two per cent for the year ended March 2001. This compares with an industry average of 12.8 per cent for the year ended March 2000. Consolidated banking sector data are not yet available for the last financial year.

The bank posted a 75-per cent rise in net profit to Rs 2.1 billion in the year to March 31, boosted by a merger with another private sector bank, TimesBank, in 2000.

India's banks have been consolidating slowly, with a few mergers in the private sector.

"We expect HDFC Bank to benefit from the ongoing consolidation in the banking industry. HDFC Bank is one of the few banks that can effect a merger with little dilution while at the same time add shareholder value," securities firm Cazenove said in a recent research report.

HDFC Bank's shares ended 1.17 per cent lower at Rs 214.05 while the main Bombay index closed 0.13 per cent up.

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