Home Market HDFC likely to raise $1 billion via 1st dollar bond sale

HDFC likely to raise $1 billion via 1st dollar bond sale


MUMBAI: Indias largest mortgage lender Housing Development Finance Corporation (HDFC) is set to raise up to $1 billion through its maiden dollar bond sales likely to hit the market in January, three people with the direct knowledge of the matter, told ET.

The company plans to expand loans in the affordable or low-cost housing segment, a key focus area for the government, as it seeks to tap business potential on a new front.

HDFC is in the process of appointing investment bankers to raise the five-year money from investors outside the US. Terms of the fund raising are yet to be finalised.

An email sent to HDFC remained unanswered till press time.

“A group of investment banks from Europe, US and Asia are in talks with the housing finance company, which see huge opportunities in the affordable housing in the aftermath of the NBFC crisis,” said one of the sources cited above.

A majority of non-banking entities including housing finance companies have stopped expanding new loans as they have struggled to raise money amid a crisis-like situation. A possible mismatch between short-term liabilities and long term assets has sparked panic among investors.

Infrastructure conglomerate IL&FS defaulted on a series of debt papers triggering such crisis of confidence that investors are shy of lending.

But, HDFC financials are robust. The company has a balanced borrowing profile and has Rs 86,000 crore in assets against liabilities of Rs 75,700 crore for up to one year maturity as on March 31.

More than half of HDFCs borrowing book comes from debentures & securities (bonds) while retail deposits form more than one-fourth. Bank loans contribute the rest 18%.

In the September quarter, HDFCs assets under management rose 17% year-on-year to Rs 4.30 lakh crore, data from the company website showed.

“HDFCs debt market borrowing cost may have gone up recently due to overall interest rate rises in the domestic NBFC sector,” said an executive from a large foreign bank and this may have prompted the company to tap the dollar-bond market to reduce cost, the person said.

Dollar bonds are priced after adding a mark-up over similar maturity US Treasury yields. In past two weeks, such sovereign securities are showing signs of easing. The benchmark yield fell about 13 basis points to 3.11% from a seven-year high.

At HDFC, the average loan size is about Rs 20.7 lakh with average loan term at 13 years.

HDFC has already obtained approval from the RBI to raise as much as $1.5 billion offshore money. It may consider another series of rupee-denominated masala bonds. The company also raised money by selling masala bonds past two years.

The company reported a 25% rise in net profit at Rs 2,467 crore during July-September period.

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