HDFC prices its biggest ever rupee bond issuance; to raise Rs 25,000 crore

Housing Development Finance Corp. priced its biggest ever rupee bond issuance ahead of a merger with its banking unit, which will create an Indian financial services behemoth valued at more than $200 billion. 

India’s largest mortgage lender will raise Rs 25000 crore ($3 billion) selling notes due in a decade at a coupon of 7.97% on Friday, according to people familiar with the matter. The proceeds will be used to support its housing finance business, said the people, who asked not to be identified discussing confidential information.

HDFC is stepping up borrowing from notes because its merger with HDFC Bank Ltd. will make accessing the bond market more difficult. The merged entity will be classified as a bank, which means it can only raise funds through bonds either to meet capital requirements or for funding infrastructure projects. 

HDFC was India’s top seller of rupee bonds last year, according to data compiled by Bloomberg.

The merger is expected to conclude next quarter, and will give HDFC access to so-called low-cost current and savings account deposits and time deposits of the bank that will let the financier continue expanding its assets, which stood at about 7 trillion rupees at the end of December. 

Axis Bank Ltd., HDFC Bank, ICICI Bank Ltd. and ICICI Securities Primary Dealership Ltd. are the arrangers to the issuance, the people said.