HDFC Bank’s Rs. 4 b debentures up for grabs

Housing Development Finance Corporation Bank’s Rs. 4 billion debenture issue became available for investing public from yesterday.

The bank is issuing 30 million rated, senior, unsecured, redeemable debentures at Rs. 100 each with an option to issue a further 10 million debentures in the event of an oversubscription of the original amount.

HDFC Bank is offering three types of debentures with floating and fixed return options on instruments, the tenure of which ranges from 5-10 years.

Type A is five-year debenture with floating interest rate of Average Weighted Prime Lending Rate (AWPR) plus 1.50% payable quarterly.

Type B five-year debenture with 10.50% fixed rate payable semi-annually with an annual effective rate of 10.78%. Type C is a 10-year debenture with 12% fixed interest rate payable annually with a 12% annual effective rate.

Whilst investors can begin subscribing from today, the official opening of the issue is on 16 November.

Joint financial advisors and managers to the issue are NDB investment Bank Ltd., and the Investment Banking Division of the Bank of Ceylon. The Trustee is Bank of Ceylon. The issue has gotten a BBB rating by Fitch Ratings Lanka. 

Objective of the issue include to mobilise medium-term funds to manage assets and liability mismatch and associated liquidity risk; finance the medium- to long-term budgeted lending portfolio and to minimise the mismatch in funding exposure and minimise the interest rate risk exposures of the bank.

HDFC Bank said it is currently on a growth drive of its lending portfolio. During the first half of the

FY 2015, the total disbursement of loans and advances has been over Rs. 5 billion compared to the budgeted lending of approximately Rs. 1 billion per month. 

Since HDFC forecasts a greater credit demand than the amount to be raised via the Debenture Issue. The bank foresees no specific risk factor in granting loans and advances from the proceeds of the issue within the specified time period and thereby achieving the above mentioned objectives. 

Long-term funds raised through the Debenture Issue will be utilised to finance the long-term lending portfolio of HDFC, which in turn will improve the assets and liability mismatch of HDFC, the bank said.