Biggest corporate bond deal: HDFC raises Rs 25,000 crore via NCDs

ICICI, Axis, HDFC Bank, ICICI Securities Primary Dealership arranged the deal

HDFC on Thursday concluded a sale of 10-year non-convertible debentures (NCDs) worth Rs 25,000 crore, marking the largest domestic rupee bond issuance by a corporate in India.

The housing financier’s bonds carry an annualised coupon — or the rate of interest periodically paid out to investors — of 7.97 per cent. On Wednesday, the 10-year benchmark government bond yield closed at 7.35 per cent in the secondary market.

According to debt market officials, the deal was arranged by ICICI Bank, Axis Bank, HDFC Bank, and ICICI Securities Primary Dealership. On Tuesday, HDFC had launched the debt issuance with a base size of Rs 5,000 crore and the option to retain additional subscription worth Rs 20,000 crore.

“Today, as soon as the bids opened, there was wide participation from several high-quality investors across insurance companies, pension funds, provident funds, banks and mutual funds. The issue was oversubscribed and received 92 bids amounting to Rs 27,863 crore, of which the company retained 55 investor bids totaling to Rs 25,000 crore,” the housing financier said.

HDFC’s fundraising this week comes ahead of the company’s merger with HDFC Bank. In April 2022, HDFC Bank said it would take over HDFC in a deal valued at $40 billion.

The merger was initially to be completed by the second or third quarter of the next financial year. Top officials of the bank later said the merger could be completed before schedule, with some analysts expecting the process to be implemented by the end of April-June.

Ahead of the amalgamation, HDFC has embarked on a large-scale spree of fund-raising, with the housing financier having raised more than Rs 50,000 crore through bond sales. Treasury officials pointed to the need for the merged entity to raise long-term funds, considering the new asset liability profile.

In December 2022, HDFC Bank raised Rs 15,000 crore through the issuance of tier-2 bonds, marking the largest sale by any bank in the current financial year.

“On a sustainable long-term basis, the demand for housing is expected to remain strong, and investor support in long term financing aids allocation of resources towards on-lending to the sector,” HDFC Executive Director V S Rangan said.