HDFC Bank raises $750 mn via 5-year bond issue from GIFT City unit

India's largest private-sector lender tapped offshore markets through its GIFT City IFSC unit, issuing senior unsecured bonds carrying a 5.067 per cent coupon

HDFC Bank, India’s largest private-sector lender, has raised $750 million through a five-year senior unsecured bond issue, marking one of the largest offshore fundraisings by an Indian bank this year and the first such issuance since the Reserve Bank of India (RBI) operationalised its concessional hedging window for overseas borrowings by lenders. Several banks, including State Bank of India (SBI), Bank of India (BoI) and Bank of Baroda (BoB), are expected to follow suit. 

The bonds, issued through the bank’s International Financial Services Centre (IFSC) Banking Unit at GIFT City, carry a fixed coupon of 5.067 per cent and mature on June 24, 2031. 

 

Issued under the bank’s medium-term note (MTN) programme, the notes were priced at a spread of 90 basis points (bps) over the benchmark US Treasury yield. Initial price guidance was set at about 120 bps over US Treasuries, but robust investor demand allowed the bank to tighten pricing by 30 bps, resulting in one of the narrowest spreads achieved by an Indian bank in the dollar bond market. The issue is rated Baa3 by Moody’s Ratings and BBB by S&P Global Ratings, in line with the bank’s issuer ratings. 

The proceeds will be used to meet the funding requirements of the bank’s overseas branches and subsidiaries, support the expansion of its international operations and fund general corporate purposes. 

BofA Securities, Citigroup, HSBC, JP Morgan, Mashreq, MUFG and Standard Chartered Bank acted as joint global coordinators and joint lead managers for the transaction. 

The fundraising is expected to open the door to further overseas issuances by Indian banks. SBI, BoB and BoI are among the banks expected to access international debt markets in the coming days, although the size of their proposed fundraisings is yet to be determined, according to people familiar with the matter. 

Non-banking financial institutions, including REC, Hudco and NaBFID, are also exploring offshore borrowing opportunities. 

Earlier this month, the RBI introduced a concessional swap facility for overseas foreign currency borrowings (OFCBs) by banks as part of a broader effort to attract foreign capital and improve domestic liquidity conditions. Under the facility, RBI will undertake swaps at a fixed rate of 1.5 per cent a year, compounded semi-annually, for eligible OFCBs with a minimum maturity of three years. The window will remain open until December 31. 

Market participants estimate current hedging costs at around 3.5 to 4 per cent, implying savings of 200 to 250 bps under the RBI’s swap arrangement. Analysts have said funds raised through the OFCB route could be 40 to 50 bps cheaper than domestic deposits of comparable maturity, helping banks meet credit demand at a lower cost while easing pressure on deposit mobilisation. 

Analysts estimate that banks could raise between $5 billion and $8 billion through the OFCB window in FY27, while a further $10 billion-$12 billion could be mobilised through the external commercial borrowing (ECB) and foreign currency convertible bond (FCCB) swap window. Total fund mobilisation through the ECB/OFCB route could therefore reach $15 billion-$20 billion during the financial year.