HDFC raises $500 m via FCCBs

Housing Development Finance Corporation (HDFC) has raised $500 million through zero coupon foreign currency convertible bonds (FCCBs) with a tenure of five years.

The previous largest FCCB issue was the $400 million offering by Tata Motors in April 2004. The FCCBs are convertible into equity shares any time after August 24, 2006 at Rs 1,399 a share. The yield to maturity of the FCCB on redemption is 4.62 per cent per annum.HDFC's FCCB issue is the first after the government relaxed external commercial borrowing norms in June 2005.

The government had allowed housing finance companies to raise funds abroad through issue of FCCBs. The issue was lead managed by ABN Amro, Barclays Capital, Citigroup and JP Morgan.

"The issuance of these bonds is a landmark event for HDFC and opens up another avenue for Indian Financial Institutions, including HDFC to raise capital in international markets. These bonds will contribute to the capital requirements of HDFC and enable it to consolidate its position as the leader in the housing finance market," said Deepak Parekh, chairman, HDFC.

FCCB proceeds provide HDFC with funds without expanding its capital base immediately. The housing finance company has a comfortable capital adequacy ratio of 14.6 per cent. The total loan assets of HDFC at the end of June 2005 were about Rs 37,000 crore.