HDFC raises Rs 1,000 crore debt at 5.85%

Housing Development Finance Company (HDFC) has become the first private corporate to raise Rs 1,000 crore debt in a single tranche and in a single option.

Incidentally, it will be first domestic issue for corporates in 2003-04. According to dealers, the issue is perceived to have broken the lull in the debt market prevailing since the Sebi-RBI guidelines clamped down on private placements.

The financial institution has tapped the market for five years at a coupon of 5.85 per cent and Deutsche Bank is the lead manager to the issue followed by ICICI bank, UTI Bank as the co-arrangers to the issue.

According to Conrod D'souza, head-treasury, HDFC, the financial institution will deploy the funds to boost its housing loan business and expanding its operations.

Incidentally Asian Development Bank, the multilateral agency which raised Rs 500 crore through a 10 year bond at 5.79 per cent last week, has also identified housing as the key investment area along with health and power.

While in 2002-03, HDFC mopped up Rs 3,200 crore via non convertible debentures, till December 2004, HDFC had added only Rs 800 crore to its bond portfolio.

In December, HDFC converted a high-cost loan to Life Insurance Corporation (LIC) worth Rs 800 crore into bonds and this was a bilateral transaction.

Thus, the outstanding papers in the market excluding the Rs 800 crore stands at Rs 4,000 crore, including the current resources raised.

The treasurer added that while international route remains cheaper, but the current guidelines on ECBs are not favourable for housing companies.

Last calendar year HDFC had raised $ 250 million for 67 months via ECBs. Bank of America, Credit Lyonnais and RZB Austria were the arrangers to the issue.

It was a structured deal wherein the investment arm of World Bank for private sector funding, International Finance Corporation had lent $ 100 million to HDFC taking the direct corporate risk on its book.

The rest, it had helped HDFC raise through the overseas market with a syndicate of 17 foreign banks. The remaining $50 million was subscribed to by DEG Germany.

While the bonds of HDFC carry a AAA rating in India, it is not a rated company in the overseas market.