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With softening of rates in the corporate bond market, housing finance firms are preferring bond issuances over bank loans and plans to raise over Rs 1.37 lakh crore are already lined up for the current fiscal.
Market leader HDFC last week told stock exchanges that it sought shareholder approval to raise up to Rs 85,000 crore through non-bank funding this year - primarily non-convertible debentures, warrants and other debt instruments.
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Out of the planned Rs 85,000 crore fund raising, Rs 5,000 crore will be through NCDs, it added.
Similarly, one of the largest mortgage lenders, LIC Housing Finance is looking to raise Rs 40,000 crore through issuance of non-convertible debentures in the current fiscal.
In the first quarter itself, it had raised Rs 7,000 crore from the bond market.
"We are reducing high cost borrowing (from banks) and increasing low-cost borrowing through non-convertible bonds," LIC Housing Finance MD and CEO Sunita Sharma told PTI.
The company had brought down its bank funding to 19 per cent from 25 per cent as of FY15-end and to around 16 per cent in the June quarter.
Its cost of borrowing in the first quarter stood at a low 8.96 per cent.
LICHFL's weighted average cost of funds has come down to 9.38 per cent as of Q1 of 2015-16 from 9.77 per cent in 2011-12.
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Lower cost of funding also helped the mortgage lender increase its net profit by 19 per cent to Rs 382.13 crore in the June quarter.
Another housing finance company, Indiabulls Housing Finance is looking to raise around Rs 12,000 crore from the bond market, of which it had raised Rs 4,000 crore in the first quarter.
"Raising money from bonds is much cheaper than bank borrowing and so, we want to maximise our bond issuances. We are planning to raise around Rs 8,000 crore more through bonds in the rest of the fiscal," its Deputy Managing Director Ashwini Hooda said.
