IFC invests $100 m in HDFC Bank

International Finance Corporation (IFC), the private sector arm of the World Bank Group, will invest $100 million in the upper tier II subordinated bonds of HDFC Bank.

The upper tier II bonds, one kind of hybrid capital instrument, will have a final maturity of 15 years. The investment will help the bank augment its capital base primarily to support its growing asset business and will also increase the bank's long term resources, IFC executive vice-president Lars Thunell said.

"It will help further improve the bank's financial fundamentals by strengthening its capital adequacy and diversifying its funding sources," explained Aditya Puri, managing director, HDFC Bank.

Iyad Malas, director, south Asia, IFC said, "IFC has a long and fruitful relationship with Housing Development Finance Corporation (HDFC), the Bank's promoter. The investment will strengthen the efficiency and reach of the banking sector in India by supporting a private sector bank."

The bonds will qualify as upper Tier II capital as per RBI guidelines. Till date, only few private sector banks in India have issued upper tier II capital bonds owing to the complexity and long term nature of these products.

HDFC Bank's equity capital was Rs 313.85 crore as on June 30, 2006 and capital adequacy ratio stood at 11.7 per cent.

The private sector bank is listed on the Mumbai and National Stock Exchanges, and the New York Stock Exchange.

Meanwhile, Barclays Bank has acquired a 4.7 per cent stake in Infrastructure Development Finance Corporation (IDFC) for Rs 380 crore.

The acquisition includes purchase of 2.11 crore shares (about 1.87 per cent) of IDFC for Rs 151.7 crore in a bulk deal on the National Stock Exchange.

Barclays also holds 4.95 per cent stake in UTI Bank and 9 per cent in Asset Reconstruction Company India Ltd (ARCIL).

It has also bid for nearly 5 per cent stake in Development Credit Bank during its initial public offer, which closed on October 6.