HDFC raises Rs 25,000 crore in India’s largest rupee bond issuance

HDFC, which is in the process of merging itself with the bank it helped spawn, offered to pay a coupon of 7.97% for the 10-year money, the company said in a statement. That compares with the benchmark bond yield of 7.34% Thursday.

A person involved in the deal said HDFC plans to take care of its future refinancing needs before its impending merger with its banking subsidiary.

“HDFC has mostly borrowed for 10 years this year to take care of refinancing needs of its loan portfolio. It has loans maturing and new loans being generated and would not want to take the refinancing risk every year whenever it comes up for renewal. They took the call to take the money available now, and many long-only funds are willing to invest because it is a high-rated AAA paper,” this person said.

Agencies

After the merger, HDFC Bank will become the largest private sector bank with more than ₹20 lakh crore of assets, out of which ₹7 lakh crore will be the mortgage portfolio. HDFC was the largest issuer of debt in the local market in CY22, accounting for 7.7% of the issuances, Bloomberg data showed.

“So far this fiscal year, HDFC has raised a total of ₹78,000 crore, out of which ₹64,000 crore is through 10 bonds. When HDFC merges with the bank, the bond market will not be as easy an avenue to raise funds because banks typically raise capital through either Tier 1 or Tier 2 bonds or specific infrastructure bonds for which the bank needs a large infra book,” the person cited above said.

A part of this money will also be used to invest in mandatory government bonds which banks are required to do under the Reserve Bank of India’s statutory liquidity requirements.HDFC Bank, ICICI Securities Primary Dealership, Axis Bank and ICICI Bank were the arrangers to the bond sale.

“There was wide participation from several high-quality investors across insurance companies, pension funds, provident funds, banks and mutual funds. The issue was oversubscribed and received 92 bids amounting to ₹27,863 crore of which the company retained 55 investor bids totaling to ₹25,000 crore,” HDFC said in a statement.

Individual investor names could not be ascertained but people familiar with the issue said all large life insurance companies, pension funds and mutual funds invested in the issue.

“On a sustainable long-term basis, the demand for housing is expected to remain strong, and investor support in long term financing aids allocation of resources towards on-lending to the sector,” said V S Rangan, executive director, HDFC.