The largest bank in India, Housing Development Finance Corporation Bank (HDFC), has received the Board’s approval for share-split. On May 22, 2019, HDFC Bank informed the exchange about the approval on share-split. An Annual General Meeting is scheduled on June 12, 2019, where the stock-spilt will be further approved by the company’s shareholders.
HDFC Bank’s board approves share-split
Mumbai headquartered HDFC Bank stands to be one of the prominent banks in the nation providing banking and financial services. The proposal is to reduce the face value of the bank from ₹2 to ₹1. With the majority of the board members in agreement the proposal, it now awaits the green signal from the shareholders.
Assuming that the shareholders agree to the share split, the procedure would then approximately take another 90 – 120 days for completion. Once the split is executed, the bank’s authorized equity capital of ₹650 crores will consist of 650 crores fully paid-up equity shares of ₹1 each. This will be from the present 325 crores equity share of ₹2 each.
The board of HDFC Bank has also approved a proposal for raising an additional ₹50,000 crores. The amount will be raised by way of private debt instruments within a year.
The objective for share-split
HDFC has set the bar high for the banking sector. It has achieved sustainable growth and delivered exemplary results. The financial stability of the bank has withstood the market correction witnessed in Q3FY18. Delivering promoting profits for the past several years has led to a steady rally in the price of the scrip.
The split is an attempt made by the bank to enhance the affordability of the stock and improve engagement of individuals and retail investors.
The proposed split will also boost the liquidity in the shares. The Annual General Meeting includes another agenda which involves the approval of the proposed dividend of ₹15 per share by the shareholders.
The banking giant had earlier opted to split its shares back in 2011 in a ratio of 1:5. That is one share of ₹10 was split into 5 shares of ₹2 each.
The robust growth of Q4FY19
HDFC Bank delivered robust performance for Q4FY19 with 22.8% YoY growth in Net Interest Income (NII) to ₹13,089.49 crores. The net profit for the same period stood at ₹ 5,885.1 crores, 22.6% higher on a YoY basis.
For Q4FY19, the gross Non-Performing Asset (NPA) stood at 1.36% compared to 1.30% in Q4FY18. The Net Non-Performing Assets (NPA) for Q4FY19 was 0.30% of net advances against 0.40% for the same period in FY18.