 "DHFL offer of NCD, India's largest, booked in a day")
Attractive coupon rate and expectations of falling interest saw the debt offering generate demand worth over Rs 12,500 crore across investor segments. This is a second NCD by the housing finance company in less than a month. DHFL’s Rs 4,000-crore NCD, launched earlier this month, had received bids worth Rs 19,000 crore.
“Our previous offering saw huge oversubscription. As a result, there was a lot of unmet demand from a large section of investors, who see NCDs as a good investment opportunity. Therefore, we decided not to wait long before another NCD,” said Kapil Wadhawan, chairman and managing director.
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The coupon rate from the latest offering ranged between 9.1 and 9.25 per cent. The tenure was between three and seven years. Bonds were rated AAA by Care and Brickwork Rating. The yields for AAA-rated corporate bonds with similar tenure are between 7.47 and 7.67 per cent.
“Investors wanted to lock in the yields on offer on expectations that interest rate will fall further,” said Feroze Azeez, deputy chief executive, Anand Rathi Private Wealth Management. “Falling rates on fixed deposits have increased attractiveness of NCDs. What has also worked for the DHFL offering is the good credit rating.”
Azeez said NCDs aren’t such an attractive proposition for those in the highest tax bracket. The institutional and wealthy investor portions have been fully subscribed, while there is little room in the retail category.
Ajay Manglunia, head of fixed income, Edelweiss Financial Services, said the DHFL’s offering has set a new benchmark and more companies would soon tap the markets with NCD offerings. DHFL plans to use the NCD proceeds to retire some of its high-cost debt and for incremental lending. “NCDs will help us diversify our fund base. Two years ago, our bank liability was 72 per cent. Now, it is 45 per cent and we plan to reduce it to 30 per cent by the end of this financial year,” said Wadhawan.
The incremental disbursement for DHFL last fiscal was around Rs 25,000 crore. Wadhwan expects 15-17 per cent growth in disbursement this fiscal and improvement in margins.
Shares of DHFL closed at Rs 280, down one per cent on Monday.
DHFL NCD: FLYING OFF SHELVES
Size: Rs 10,000 crore, including Rs 8,000 cr greenshoe
Coupon: 9.05% for institutions, corporates; 9.10%-9.25% for HNIs, retail
Tenure: Three to seven years
Demand: Institutional, corporate, and HNI categories fully covered; retail around Rs 1,900 cr of Rs 3,000 cr subscribed
Issue date: August 29 to September 12 (closes early if fully subscribed)