India’s HDFC Raises $1.85 Billion in Largest-Ever Bank Bond Issue

 

India’s HDFC Bank completed the largest ever bond issuance by any bank on Thursday amid strong demand from long-term investors.

The private lender raised 150 billion Indian rupees ($1.85 billion) through 10-year Tier II bonds at an annual coupon of 7.86%, for which it had received bids worth 240.80 billion rupees, according to merchant bankers.

Analysts said they did not think the issue would undermine the prospects for other upcoming bond issues.

“The issue saw very strong bids from large investors, and in fact the bond has been trading at a premium in secondary market as traders did not get much stock from primary,” Ajay Manglunia, managing director and head of investment grade group at JM Financial, said.

The cutoff yield was at a spread of around 60 basis points against 10-year benchmark government securities which were yielding 7.25% on a semi-annual basis earlier in the day, largely in line with historical trends, as per bankers.

A large state-run insurance company and a big provident fund house invested an aggregate 90 billion rupees in this issue, merchant bankers said.

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State Bank Issue Friday

HDFC Bank completed its debt sale a day ahead of State Bank of India‘s bond issue on Friday.

The nation’s largest lender aims to raise up to 100 billion rupees through sale of 10-year infrastructure bonds, riding on the demand from provident fund houses and insurance companies.

Banks have been sparing in tapping the bond market, leading to higher demand for their debt issues, Nagesh Chauhan, head of debt capital market at Tipsons Group, said.

“Since state debt supply has been very low, large investors are scrambling to invest money, and hence such big issuances are easily getting absorbed,” a trader with a private bank said.

Further, lower supply from states is also whetting investor appetite for corporate bonds.

Indian states mopped up 4.03 trillion rupees via sale of debt in the first eight months of this financial year, lower than 5.75 trillion rupees scheduled to be raised.

HDFC Bank is set to be merged with parent Housing Development Finance Corp in coming months, and both entities have been on a fundraising spree this financial year.

While HDFC Bank has already raised 30 billion rupees, barring the latest issue, HDFC has raised around 550 billion rupees through bond issuance.

 

• Reuters with additional editing by Jim Pollard

 

 

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