HDFC plans to raise Rs 25,000 crore through bonds

India’s net debt issuances over the last three years have significantly overshot budget estimates and it is likely that the FY24 number will exceed the Rs 12.2 lakh crore threshold.

Housing Development Finance Corporation (HDFC) expects to raise as much as Rs 25,000 crore through a sale of 10-year bonds on February 16, merchant bankers aware of the plan said. Bidding will take place from 9.30 am to 10.30 am on the BSE’s bidding platform.

This is the highest amount that HFDC plans to raise and comes ahead of its merger with HDFC Bank, one banker told Moneycontrol on February 15. One person said the base issue is for Rs 5,000 crore with an option to keep an additional Rs 20,000 crore.

Dealers said the mega bond issue ahead of the HDFC-HDFC Bank merger is intended to mop up funds and test investor appetite for such paper. This is because banks have limited options to raise funds such as mobilisation of deposits, issuances of certificates of deposit, and infrastructure bonds, one of the people said.

“It is to ensure that big investors don’t miss out,” said a merchant banker.

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Market participants said if more investors bid for the issue, it will provide some premium on the coupon set on the bonds.

According to Prime Database, HDFC has raised Rs 53,415 crore through private placement of debt as of February 14, 2023. HDFC Bank has raised Rs 23,000 crore so far in the current financial year.

HDFC got in-principle approval from the National Stock Exchange of India and the BSE last year for the merger with HDFC Bank.

HDFC had already received approval letters from the Reserve Bank of India, the Securities and Exchange Board of India, the Pension Fund Regulatory and Development Authority, and the Competition Commission of India. It had earlier received no-objection certificates from both stock exchanges.

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The National Company Law Tribunal had also given its nod for holding a shareholders' meeting to obtain approval for the proposed merger last year.

Other companies issuing bonds on February 16 are Power Grid Corporation of India, which plans to raise Rs 2,300 crore, and National Bank for Agriculture and Rural Development, which plans to raise Rs 684 crore.

Companies prefer to issue bonds because it releases them from restrictions that come with bank-term loans.

Currently, three-year bonds trade at 7.65-7.70 percent, five-year bonds at 7.68-7.72 percent and 10-year bonds at 7.75 percent.