• Thu. Dec 7th, 2023

Housing Finance Bank

Housing Finance Bank, The Real Thing

HDFC Bank: HDFC to raise $750 m offshore debt to lend for affordable housing

Mumbai: (HDFC) is set to raise $750 million in what will likely be its last fundraising through an external commercial route before the mortgage lender’s proposed merger with HDFC Bank, said three people familiar with the matter.

The proceeds will be used to lend to buyers of affordable homes.

A group of banks including Mizuho Bank, MUFG, and Standard Chartered Bank are syndicating the five-year credit line.

The universe of foreign banks may expand later.

“The borrower prefers to tap the overseas market instead of crowding out the local market,” one of the persons cited above told ET.

HDFC to Raise $750 m Offshore Debt to Lend for Affordable Hsg

The loan may be priced after adding 110-120 basis points over and above the term SOFR (Secured Overnight Financing Rate), a global rate gauge that is yielding around 2.63% now. If the borrower hedges the full funds it may have to pay another 400-450 basis points going by current cost of currency risk covers in the forwards market.
One basis point is 0.01%.

HDFC and individual banks did not comment on the matter.

HDFC has a total borrowing of $65.83 billion as on March 31, FY22, according to the home financier’s investor presentation. Just about 3% of it comes from external commercial borrowing (ECB) while 40% is raised through local bonds. The rest is divided into bank term loans (25%) and a larger share of public deposits at 32%.

“Demand for housing continued to remain strong for both the affordable housing and high-end segments,” said Sharekhan in a report two weeks ago.

The management believes that India’s housing loan market would double to $600 billion in the next five years with estimated mortgage penetration of 13% of GDP, which would still be lower as compared to emerging economies.

“It believes that the optimum path to scale up housing finance is to be housed within a banking structure,” the brokerage said, citing management commentary. “The resources pool for lending will be significantly larger and at lower costs.”

The company is waiting for regulatory approval of proposed amalgamation of HDFC with

Bank. HDFC has a gross loan book of $86.15 billion where individuals form about four-fifths of the size.

Last week,

raised $100 million from the in a five-year loan. It was priced after adding 275 basis points over SOFR.

Both HDFC and

, the country’s leading consumer financier, are triple-A rated. Although they are not strictly comparable in terms of secondary market liquidity and primary bond sales, the average yield differentials across three-year, five-year and 10-year segments have compressed by about 10-15 basis points, dealers said.

This has happened as life insurers have started shying away from HDFC papers due to regulatory ceiling complications expected to arise after the proposed merger. HDFC credit quality remains sacrosanct.


By admin

Leave a Reply

Your email address will not be published. Required fields are marked *