HDFC planning to raise $500 mn via FCCBs

Housing finance major Housing Development Finance Corporation (HDFC) is planning to raise $500 million through foreign currency convertible bonds (FCCB). If the plan goes through, HDFC will become the largest ever FCCB issuer in India.

Tata Motors' $400 milion FCCB issue, raised in April last year, has been the largest international capital market offering by an Indian company so far.

Confirming the development, HDFC Managing Director Keki Mistry told Business Standard, "We are awaiting the Reserve Bank of India approval for the issue."

In the first week of June, the government eased the external commercial borrowing (ECB) norms by allowing non-banking finance companies and housing finance companies to raise money overseas through FCCBs subject to RBI approval. They were banned from accessing the overseas market for resources by the ministry a few years back.

Market sources said, HDFC was giving final touches to its FCCB plan and a formal announcement is expected soon. The housing major is holding its annual general meeting on July 15.

An FCCB is a bond convertible into equity shares, during an agreed period or on maturity. An FCCB instrument suits HDFC's requirement well, as it does not require fresh capital at this point of time. Its capital adequacy ratio on March 31 was to the tune of 13.4 per cent.

"After about five years, when the FCCBs get converted they will shore up HDFC's capital base," said sources. It has an asset base of Rs 40,531 crore and has posted a net profit of Rs 1,036.58 crore in fiscal year 2004-05.