HDFC Limited, one of India’s leading mortgage lenders, has recently announced a major fundraise plan to secure Rs 57,000 Crore. This move comes as part of the company’s strategic efforts to augment its long-term resources and meet the growing demands of the housing finance business. In a bid to raise the funds, HDFC has issued a post-bidding term sheet outlining the key terms of the non-convertible debentures (NCDs) that will be offered to investors. Let’s delve deeper into the details of this significant development.
Terms of the bond sale
To achieve the ambitious fundraise target, HDFC has set the base price of the bond sale at Rs 5,000 Crore. Additionally, the company has offered an attractive subscription offer of Rs 5,000 Crore, making the total size of the bond issuance Rs 57,000 Crore. The coupon rate for these two-year bonds has been fixed at 7.80 percent, making it an enticing investment opportunity for potential investors.
Nature and placement of the bond sale
The NCDs offered by HDFC in this bond sale are unsecured in nature, providing investors with an added layer of reassurance. Moreover, the mode of placement for these bonds is through a private placement process. To ensure transparency and credibility, prominent credit rating agencies CRISIL and ICRA have given HDFC’s bond instrument a ‘AAA’ rating, indicating the highest level of safety and stability.
Listing and timeline of the NCD
HDFC has disclosed that the debentures issued through this shelf placement memorandum will be listed within three days from the Issue Closing Date of each series. The listing will take place in the wholesale debt market segment of both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), providing investors with an easily accessible platform to trade these securities.
Utilization of the funds
The main goal of the fundraising strategy is to increase HDFC’s long-term financial resources. The bond issue’s profits will be used to fund and refinance the corporation’s needs for its home finance business. By raising a sizable amount of money through this calculated action, HDFC hopes to increase its lending capacity and meet the changing demands of developers and homebuyers.
Coupon payment details
As per the terms sheet, the coupon payments for the NCDs will be made on an annual basis. The first coupon payment date is set for 2nd June 2024, followed by another payment on 2nd June 2025. This regular stream of income will provide investors with an attractive return on their investment, enhancing the appeal of HDFC’s NCDs.
HDFC has established clear provisions to address any potential defaults in coupon payments or redemption of the principal amount. In the event of a default, the company will pay an additional interest of at least 2% per annum over and above the coupon rate. This penalty will continue until the defaulted amount, along with the delay penalty, is fully paid by HDFC.
Bidding process and funds raised
The bidding for HDFC’s NCDs commenced on 31st May 2023 and concluded on the same day. According to reports, HDFC successfully raised an impressive amount of Rs 8,325 Crore from this bond issue. The substantial response from investors reflects their confidence in HDFC’s strong reputation and credibility in the financial market.
Background information on HDFC’s fund raise plan
This recent bond issue is part of HDFC’s larger fund raise plan, which was approved by the company’s board of directors in March 2023. The plan aims to raise funds worth Rs 57,000 Crore to support the corporation’s long-term growth objectives. The successful implementation of this plan will bolster HDFC’s position as a leading player in the housing finance sector and enable it to fulfill the aspirations of countless individuals and families looking to own a home.
HDFC’s unveiling of its Rs 57,000 Crore fund raise plan through the issuance of NCDs marks a significant milestone in the company’s growth trajectory. With an attractive coupon rate and credible credit ratings, HDFC has positioned itself as an appealing investment opportunity for both institutional and individual investors. The funds raised through this bond issue will empower HDFC to meet the increasing demands of the housing finance business and contribute to the growth and development of the real estate sector in India.
Housing Development Finance Corporation Limited (HDFC) is a private development finance institution in India headquartered in Mumbai. It plays a significant role as a housing finance provider in the country. HDFC also operates in various other sectors, including banking, life and general insurance, asset management, venture capital, real estate, education, deposits, and education loans.
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