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HDFC Raises $500 Million Through Masala Bonds

HDFC raises the largest tranche of so-called masala bonds in the overseas markets.

Signage for HDFC displayed in Mumbai (Photographer: Adeel Halim/Bloomberg) 
Signage for HDFC displayed in Mumbai (Photographer: Adeel Halim/Bloomberg) 

Mortgage lender Housing Development Finance Corp. (HDFC) has raised the largest tranche of so-called masala bonds in the overseas markets.

In a notification to stock exchanges late on Friday, HDFC said that it has raised $504 million or Rs 3,300 crore through such bonds. Masala bonds are debt instruments that are issued overseas but are denominated in local currency, which helps eliminate the currency risk associated with overseas borrowings. This risk is borne by the foreign investors, who then seek higher yields on such bonds to compensate for any anticipated currency volatility.

HDFC issued the current tranche of bonds at a coupon rate of 7.35 percent payable semi-annually. The bond are unrated and will be listed on the London Stock Exchange.

"We wish to inform you that, the Corporation received an overwhelming response from 29 investors across Asia and Europe. The aggregate demand for the transaction was 2.16 times at Rs 4,315 crore ($657 million)," said HDFC in its notification. The company set out to raise about $300 million but retained a larger amount due to the strong demand for the issue, which in turn made the pricing more attractive for the company.

The issue for HDFC has so far been the largest in the masala bond market. HSBC was the banker to the issue.

The RBI first allowed Indian firms to raise masala bonds in September 2015 but the market was slow to pick up. Since then 14 masala bond issues have been listed on the London Stock Exchange with a combined outstanding value of just under Rs 13,000 crore, according to data from the exchange.