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HDFC to become first issurer of Masala Bonds to overseas investors in order to raise Rs.3,000 crore

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Housing Development Finance Corporation (HDFC) Ltd is planning to raise about Rs.3,000 crore by issuing the first unrated Synthetic Indian Rupee (INR) Notes to overseas investors. It is the first Indian public issuer of the Synthetic INR Notes. Our country’s largest private sector mortgage lender HDFC, plans to raise Rs 3,000 crore through these synthetic bonds.

hdfc-bank
The company nominates to issue Rs 2,000 crore with an option to retain over-subscription of up to Rs 1,000 crore and this Corporation is the first Indian public issuer of synthetic INR notes.

Incumbency period:

These bonds will bear a fixed coupon and will have a incumbency period of 3 years and 1 month. 

Joint Ventures:

The company has named Axis Bank, Credit Suisse and Nomura as joint venture runners and lead managers to the event.

Listings:

  • The Corporation proposes to list the notes on the London Stock Exchange and the pricing will take place on or before July 15, subject to market conditions and settlement shall be in the following week.
  • Now HDFC borrows at around 8.30-8.35% in the domestic market for tenure of five years. In the case of masala bonds, the currency risk lies with investors, who therefore were seeking a higher rate.

Registration:

  • These Bonds will not be registered under the US Securities Act and will not be offered or sold the US, except in accordance with
  • Regulations or consistent to any other exemption from the registration requirements of the US Securities Act, 1933.

Overseas Stake in the firm:

  • As on March 31, 2016, HDFC Ltd had outstanding gross loans of Rs. 2, 91,500 crore. Foreign investors hold majority stake (77 per cent) in the housing finance company.
  • As per HDFC norms, an entity can borrow a maximum of Rs 5,000 crore in a fiscal through issuance of rupee-denominated bonds overseas under the automatic route from $750 million earlier.

About HDFC:
♦ Name – Housing Development Finance Corporation.
♦ HQ – Mumbai
♦ CEO – Aditya Puri
♦ Establishment – 1994

Points to Remember:
The Reserve Bank of India (RBI) allowed companies to issue rupee-denominated bond overseas in September 2015.

About MASALA BONDS:

  • Masala bond is a term utilized to denote a financial instrument through which Indian living can raise money from overseas markets in the rupee but not in the foreign currency.
  • These rupee denominated bonds are international money making instruments but in order to give them a local Indian flavor they are been named as MASALA BONDS by the International Finance Corporation (IFC).
  • They are used to boost up the rupee, if they are eagerly swished up the foreign investors.
  • These bonds are released by the Government in order to extend the Indian Financial system and also to internationalise the Indian Currency.
  • Apart from helping in maintaining a stable exchange rate, the inflows from these bonds will also support the Indian Currency.