One unit equals three shares for a deal which comprises all new shares. Based on HDFC's Rp218.25 close today, the group will raise $155.1 million.
Observers believe that investors have flocked to the offering because of the bank's growth forecasts and management abilities. HDFC is regarded as India's leading private sector bank and analysts report that local investors have always accorded it a premium to the domestic banking sector.
For many, the ADR's success will hinge on the leads' ability to price it at a premium to the underlying stock. Should they succeed, HDFC Bank will be the first Indian issuer to do so since ICICI Bank in March last year.
Merrill Lynch and Morgan Stanley also led that $175 million ADR, which priced at $11 per unit, a 5.5% premium to a five-day average. Currently bid at $5.17, after trading down 61% in a year, the ADR is at parity to the underlying stock.
By contrast, the bank's parent, ICICI, is trading at a 21% premium to its underlying scrip, having been originally sold at parity. In 1999, it became the first Indian entity to list on the New York Stock Exchange, in a deal also led by Merrill Lynch and Morgan Stanley, the two banks which have dominated ADR issuance from the subcontinent ever since.
Local analysts believe that a second reason for HDFC’s success lies in the current low level of its share price, which recently dropped below Rp200 for the first time since September last year. Since the beginning of the June, the stock has had a volatile track-record, dropping 13% in the space of two weeks. The beginning ofr roadshows, however, have seen it re-capture its losses.
At current levels, it is trading on a p/e ratio of about 25 times 2001 earnings.