HDFC will list its other businesses such as HDFC Credila and HDFC ERGO when the right time comes, said Keki Mistry, vice chairman and chief executive of the company.

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"General insurance business and education finance arm will be the next in line to be listed in next few years," Mistry said.

At some point in time over the next three-five years, HDFC would certainly look at listing these companies but it has to do it at the right time, he said.

"It is not necessary that we have to do it this year or next year but when we believe that the time is right in terms of getting sufficient size then we would look at listing these businesses," added Mistry.

HDFC has listed two of its subsidiaries over the last year, HDFC Standard Life and HDFC AMC.

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Open to acquisitions in both general and life insurance segments, says Keki Mistry

Edited Excerpts

Can you tell us about the utilisation of funds that was recently raised by the company?

A: We use it for a variety of purposes. Firstly, we need to be putting capital into our various subsidiaries. We put in money in HDFC Credila, it is education finance business.

Then we said we would look at the health insurance business, currently, there is nothing in sight, there is no company that we are looking at or talking to, but it is something which we have in mind. It would require capital whether it is organic or inorganic, it would require capital. So that is the second area of growth.

The third one is we talked about stressed real estate business so whilst it would be a funds structure, some percentage of the money in that fund will have to be put in by us to give confidence to ultimate investors, all of that will consume capital over a period of time.

So now what is the next stage of growth and value creation for the shareholders that you are looking at?

A: I talk briefly about HDFC Credila. We infused some capital into that business recently. We have HDFC ERGO which is a foray into property and casualty (P&C) insurance, at some point in time over the next three-five years, we would certainly look at listing these companies but we have to do it at the right time.

It is not necessary that we have to do it this year or next year but when we believe that the time is right in terms of getting sufficient size then we would look at listing these businesses. These are businesses, which at some point in time could be listed.

Is it going to be general insurance and health insurance separate, is that the strategy or all rolled into one?

The ideal strategy would be that HDFC General Insurance – the subject is, of course, complied regulatory requirements – sets up a wholly-owned subsidiary or carries out the health insurance business as a subsidiary of it, that is the ideal strategy that we would like to look at.

Life insurance business is doing well, in fact, the stock has been performing very well as well, what is the next stage in terms of strategy and growth for that company and inorganic growth and that also is something to beef it up further?

A: We have done some inorganic growth in a general insurance business where we bought over L&T General Insurance a couple of years ago but in the life business, we never had inorganic growth and despite that, we have had a stable growth.

So our profit margins are good and we would like to consistently keep growing and keep eyes open for any inorganic growth opportunity.

Even in health insurance as well, you did look at Star Health, now it has gone at Rs 6,500 crore for a while, how do you measure the valuation expectations?

A: It is not for me to comment on why the Star Health valuation is Rs 6,500 crore but our valuation was lower and we have put in a value at that price.

What about Punjab National Bank (PNB)?

A: We are not interested in PNB, we were not interested in PNB Housing. We have clarified that to the market. What we have to understand this is nothing to do with PNB Housing, please understand that. When there is any acquisition that you are looking at, one has to look at a culture fit also.

I am not anywhere referring to PNB Housing. I am just making a very generic statement that the business of lending has a certain set of values, ethics and culture that you create and just going and acquiring something because something is available in the market is not the right strategy. At the end of the day, the fit has to be right. So we keep our eyes and ears open, if an opportunity does come up and we find that the fit is right, we would be happy to look at it.

The other bit is also what amount of cash goes in or how dilutive it can get, is there also that constraint of a cash deal or an equity deal that is playing on your mind?

A: No, I mean any deal that you do, it depends on the size of the deal. It depends on so many factors. Yes, there could be a deal where there is part cash, there could be a deal where there are part shares or it could be all cash, it could be all shares, it depends on the deal.

I don’t think there is any particular view one way or the other. If it is accretive to the business then some degree of cash followed by some degree of shares, which also makes sense because, at the end of the day, you are getting a lumpy growth in your balance sheet.

You have explored the opportunity in various sectors, various pockets of financial services and you have seen many companies as well, how have been the valuation expectations, what is your thought process as a buyer?

A: In which business?

In housing finance to start with?

A: We did see in Can Fin Homes. We made a bid at a certain price, which we believe was the right price and they found the price was lower, they wanted a higher price and therefore we did not go further.

So at the right price and that price will vary from business to business an acquisition makes sense provided the culture fit is there, provided the value systems are in place and so on and so forth.