 "HDFC's masala bonds subscribed three times so far")
Housing Development Finance Corporation’s (HDFC)’s masala bonds’ issue has so far seen two-three times subscription for the coupon rate the mortgage lender is perceived to issue the paper at.
The lender said it is looking at placing the paper to raise Rs 2,000 crore, with a right to retain over-subscription of Rs 1,000 crore, at a coupon rate, say sources, of 8.37-8.38 per cent. This is roughly the same price the firm pays for money raised from the local markets.
Near the start of the issue, at the perceived coupon rate of 8.45 per cent, the oversubscription demand was phenomenal, exceeding 10 times, one source said.
According to sources, the subscription level fell to about two-three times at the later-perceived reduced coupon rate of 8.37-8.38 per cent. Sources say the lender is trying to squeeze the rate even further.
“The company can get finer rates, but that could upset the future investors for such paper. Since the move is only to create a market, HDFC may settle at 8.37-8.38 per cent,” said a banker familiar with the matter.
The masala bonds, or rupee-denominated bonds, are the first such issuance from an Indian company, and are expected to be followed by other issuers from India.
The issue is expected to close by Thursday afternoon or Friday morning. The bonds are being issued outside India and the US and are unrated. HDFC is rated AAA in the domestic market.
Axis Bank, Credit Suisse and Nomura are the underwriters and lead arrangers for these bonds.
BREAKING DOWN MASALA BONDS By doing so, masala bonds help internationalise the rupee and deepen the Indian bond markets
By issuing bonds in rupees, an Indian entity is shielded against the risk of currency fluctuation, typically associated with borrowing in foreign currency
As masala bonds raise money in rupees, foreign investors will be taking the currency risk
The lender said it is looking at placing the paper to raise Rs 2,000 crore, with a right to retain over-subscription of Rs 1,000 crore, at a coupon rate, say sources, of 8.37-8.38 per cent. This is roughly the same price the firm pays for money raised from the local markets.
Near the start of the issue, at the perceived coupon rate of 8.45 per cent, the oversubscription demand was phenomenal, exceeding 10 times, one source said.
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This is not the coupon rate at which a bond is issued but is a perceived coupon rate. Based on the interest level, the final coupon rate is negotiated after the issue is complete.
According to sources, the subscription level fell to about two-three times at the later-perceived reduced coupon rate of 8.37-8.38 per cent. Sources say the lender is trying to squeeze the rate even further.
“The company can get finer rates, but that could upset the future investors for such paper. Since the move is only to create a market, HDFC may settle at 8.37-8.38 per cent,” said a banker familiar with the matter.
The masala bonds, or rupee-denominated bonds, are the first such issuance from an Indian company, and are expected to be followed by other issuers from India.
The issue is expected to close by Thursday afternoon or Friday morning. The bonds are being issued outside India and the US and are unrated. HDFC is rated AAA in the domestic market.
Axis Bank, Credit Suisse and Nomura are the underwriters and lead arrangers for these bonds.
BREAKING DOWN MASALA BONDS
- Masala bond refers to a bond through which Indian entities can raise money from foreign markets in rupee, and not in foreign currency