HDFC Bank to raise up to Rs 5,000 cr via infra bonds

CRISIL assigns AAA/Stable rating to bond issuance; rating on bank's other debt instruments reaffirmed at AAA/Stable

HDFC Bank is set to raise up to Rs 5,000 crore by way of infrastructure bonds. Rating agency CRISIL has assigned AAA/Stable rating to the bond issuance.

“The ratings on HDFC Bank’s debt instruments continue to reflect the bank’s established market position, healthy capitalisation supported by strong asset quality, comfortable resource profile, and robust earnings performance,” said a note from CRISIL.

GEARING UP

• Lender plans to raise up to Rs 5,000 crore by way of infra bonds
• Rating agency CRISIL has assigned AAA/Stable rating to the bond
• Infra bonds of more than seven years will be exempted from CRR & SLR requirements
• Proceeds from bonds can be used for funding infra or affordable housing projects

Recently, ICICI Bank had said it was planning to raise infrastructure bonds. However, the lender had not mentioned the amount.

Last year, HDFC Bank had raised Rs 3,000 crore by issuing bonds on a private-placement basis. The management had earlier said the bank would raise money to cater to the increase in credit demand expected from the corporate and the retail sectors.

The management had earlier said the lender would look at lending to projects in the infrastructure space, which approximately accounted for up to 15 per cent of the bank’s book.

In the last two months, the industry had seen an uptick in credit demand, which was now between 11 and 12 per cent, higher than the nine-10 per cent seen in the past few quarters.

The lender had a steady asset quality with low gross non-performing assets (NPAs) of 1.0 per cent as on December 31, 2015, against the industry average of around 2.5 per cent, according to a CRISIL report. Analysts do not believe that the focus on troubled sectors such as infrastructure would be a problem for the bank.

Banks became more interested in raising money via long-term bonds after the Reserve Bank had changed the regulation, announcing that such bonds (tenor of more than seven years) would be exempted from cash and statutory reserve requirements, if the proceeds were used to fund new long-term infrastructure projects and affordable housing. Also, the loans funded via this process would be exempted from the computation of adjusted net bank credit for the purpose of calculating priority sector lending requirements.