It will also use fresh capital for funding inorganic opportunities and investments into existing group businesses, its vice chairman and chief executive Keki Mistry said.
He said that the institution was yet to get shareholders’ nod for raising fresh funds and the exercise of raising funds would begin soon after the shareholders gave their approval.
Mistry said, “These investments will continue to be in financial sector which is core business. One of the things we would look at is establishment of a real estate fund”.
The fund is expected to become functional latter part of the current financial year (FY21). HDFC will not have any active role in working of the proposed fund as it will be in conflict with its lending activity. The financial institution will put the money as investment in the proposed fund and will rope in a partner for real estate fund financing of distressed assets in the real estate sector.
The real estate sector had been going through bad phase marked by falling sales and piling up of inventory even before the onset of thye Covid-19 pandemic. The severe economic disruption and change in usage pattern during the lockdown will severely impact the demand for space (real estate) in coming quarters, analysts said.
Last year, the government sponsored a fund to provide last-mile funding for stuck real estate projects. The fund is being managed by SBICAP Ventures. Edelweiss Alternative Asset Advisors (EAAA), unit of Edelweiss group, and South Korean Financial services conglomerate Meritz Financial Group, also inked a pact to start an Alternate Asset Fund for real estate completion financing.
Last week, in a letter to shareholders, HDFC chairman Deepak Parekh said that HDFC group firms had the opportunity to grow via mergers and acquisitions (M&As) on account of the ongoing crisis. The subsidiaries need additional capital to prepare for the same.
“We are now emerging in a scenario where there may be inorganic opportunities for our group firms. Some of our subsidiaries will need additional capital for expansion. We have also identified new investment opportunities to help build the next generation of value creators,” Parekh wrote in the annual report, addressing shareholders.
HDFC has been active in mergers and acquisitions, especially in the insurance space. In 2019-20, HDFC ERGO Health. erstwhile Apollo Munich Health Insurance, will merge with HDFC ERGO through a share swap deal. Mortgage lender HDFC Ltd is the promoter of general insurance firm HDFC ERGO.