HDFC to raise Rs 1k cr via bonds

HDFC, the country’s largest housing finance company, is planning to raise up to Rs 1,000 crore through non-convertible debentures (NCDs) with a green-shoe option next week. Sources close to the development said the company would issue NCDs worth Rs 200 crore, while keeping an option to raise another Rs 800 crore through the green-shoe option.

“HDFC will issue NCDs, possibly on December 23. The company particularly targets insurance companies and mutual funds as investors of the NCD issue. Following this, the company intends to raise further capital through exercising a green-shoe option. The capital is expected to be raised within a week of the launch of the issue,” said the executive.

A green-shoe option is a provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. This is normally done if the demand for a security issue proves higher than expected.

“The NCDs would be offered at the rate of 9.90 per cent on ten-year papers,” the executive added.

Sources further confirmed that HDFC had raised about Rs 800 crore through a similar NCD issue last month on ten-year papers at the rate of 11.95 per cent.

Following the central bank’s liquidity measures, while the public sector banks have already gone for a series of rate cuts, both on deposits and lending, most of the privately-held banks and non-banking financial companies (NBFCs) are yet to take a call on rate cuts, owing to their high cost of funds.

Housing finance companies and NBFCs have been complaining about their high cost of borrowing, leading to a higher than average rate of interest in the industry and consequent decline in lending businesses. HFCs have been facing difficulty in raising funds.