National Housing Bank raises Rs 3,830 cr through 10-year bonds at 7.14%

State-owned National Housing Bank (NHB) on Thursday raised Rs 3,830 crore through 10-year bonds in the domestic debt capital markets at a coupon rate of 7.14 per cent, said sources aware of the development.

 

NHB, a development financial institution that was earlier the apex regulatory body for housing finance companies, aimed to raise Rs 5,000 crore, with a base issue size of Rs 2,000 crore and a green shoe option of Rs 3,000 crore. However, it did not raise the full amount as the rates were slightly higher than anticipated, according to market participants. The bonds have been rated ‘AAA’ by domestic credit agencies Crisil, Icra, and Care.

 

 

NHB received bids worth Rs 4,950 crore at a coupon of 7.16 per cent and Rs 4,310 crore at a coupon of 7.15 per cent.

 

According to Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP, the cut-offs for these bonds are somewhat linked to corresponding government bond yields on the day, the demand-supply situation, and the availability of investor funds.

 

“Yields have already declined without any rate cuts, and the spreads between sovereign bonds and AAA-rated PSU corporate bonds have also compressed. However, issuers are still able to secure favourable rates in recent issuances with aggressive cut-offs, primarily due to the participation of large investors with sufficient interest and available exposure limits,” he said, adding that last month, bond supply was relatively muted, giving an advantage to the first few large issuers this month.

 

NHB opted for a 10-year issuance after nearly a decade. Normally, it goes for bond issuances with tenors up to 7 years.

 

Earlier this week, another state-owned entity, Indian Railway Finance Corporation (IRFC), a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas capital markets, raised Rs 1,415 crore through bonds maturing in 15 years at a coupon rate of 7.14 per cent, although it was initially looking to raise Rs 3,000 crore, with a base issue size of Rs 500 crore and a green shoe option of Rs 2,500 crore. The company received bids worth Rs 4,985 crore from investors but retained only Rs 1,415 crore, as it was expecting lower rates.