 "HDFC first Indian firm to issue masala bonds")
Housing Development Finance Corp Ltd (HDFC) on Monday said it would issue rupee-denominated bonds worth Rs 2,000 crore, with an option to retain over-subscription of up to Rs 1,000 crore, to foreign investors outside the US.
The firm will be the first Indian entity to issue such a bond after the central bank clarified in April that the overall limit of the bonds would be within the $51 billion that foreigners are allowed to invest in corporate bonds. The total corporate bond limit, in rupee terms, was fixed at Rs 2,44,323 crore.
So far, the International Finance Corporation has issued rupee-denominated bonds, commonly known as “masala” bonds in the international market.
By issuing masala bonds, the issuer shields itself from any exchange rate fluctuation, as the payment is done in rupees. However, the investors in these bonds take the risk of exchange-rate fluctuations. As such, the bonds should carry a higher coupon than what HDFC would have offered, had the bonds been issued in a foreign currency.
HDFC said it has appointed Axis Bank, Credit Suisse and Nomura as joint bookrunners and lead managers for the unrated “synthetic” rupee notes, which will bear a fixed coupon and will have a tenor of three years and one month.
HDFC plans to list the bonds on the London Stock Exchange and said the pricing would take place on or before Friday, subject to market conditions. Settlement would be done the following week, the mortgage loan company said in a statement.
“HDFC is keen to diversify its borrowing profile, by tapping global investors through this issue of rupee-denominated bonds. This milestone issuance, the first of its kind, should validate the attractiveness of the instrument and set a good benchmark,” said Deepak Parekh, chairman, HDFC Ltd.
The bonds would not be offered or sold within the US, HDFC said in a statement.
The firm will be the first Indian entity to issue such a bond after the central bank clarified in April that the overall limit of the bonds would be within the $51 billion that foreigners are allowed to invest in corporate bonds. The total corporate bond limit, in rupee terms, was fixed at Rs 2,44,323 crore.
So far, the International Finance Corporation has issued rupee-denominated bonds, commonly known as “masala” bonds in the international market.
By issuing masala bonds, the issuer shields itself from any exchange rate fluctuation, as the payment is done in rupees. However, the investors in these bonds take the risk of exchange-rate fluctuations. As such, the bonds should carry a higher coupon than what HDFC would have offered, had the bonds been issued in a foreign currency.
HDFC said it has appointed Axis Bank, Credit Suisse and Nomura as joint bookrunners and lead managers for the unrated “synthetic” rupee notes, which will bear a fixed coupon and will have a tenor of three years and one month.
HDFC plans to list the bonds on the London Stock Exchange and said the pricing would take place on or before Friday, subject to market conditions. Settlement would be done the following week, the mortgage loan company said in a statement.
“HDFC is keen to diversify its borrowing profile, by tapping global investors through this issue of rupee-denominated bonds. This milestone issuance, the first of its kind, should validate the attractiveness of the instrument and set a good benchmark,” said Deepak Parekh, chairman, HDFC Ltd.
The bonds would not be offered or sold within the US, HDFC said in a statement.