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Bond Yield Spike Sends Indiabulls Housing to Banks for Funds

Indiabulls Housing Finance plans to rely on bank loans and commercial paper to meet its funding needs.

Mortgage lenders Dewan Housing Finance Corporation Ltd and Indiabulls Housing Finance Ltd blamed rumours for the sudden plunge in shares on a day the benchmark Sensex swung the most in more than four years.
Mortgage lenders Dewan Housing Finance Corporation Ltd and Indiabulls Housing Finance Ltd blamed rumours for the sudden plunge in shares on a day the benchmark Sensex swung the most in more than four years.

(Bloomberg) -- Indiabulls Housing Finance Ltd. plans to rely more on bank loans and commercial paper to meet its funding needs because of waning appetite for bonds sold by Indian shadow lenders, according to the Managing Director of the financier.

While the lender itself hasn’t had a large bond issuance since July because of the troubles plaguing the industry, an attempt by its consumer finance unit to raise at least 1 billion rupees ($14 million) met with poor response last month.

Bond Yield Spike Sends Indiabulls Housing to Banks for Funds

What’s more, Indiabulls Housing’s rupee note due September 2021 traded at a record 43.04% yield on Thursday, which the company said is an erroneous trade.

“There was a transaction, erroneous as it may have been, yesterday which can potentially disrupt the whole franchise,” Gagan Banga, managing director of Indiabulls Housing said by phone on Friday. “It will be foolhardy for me to go back to the same business model where I’m relying heavily on bonds and having 50 to 60% of financing coming out of it.”

Moody’s Investors Service cut the ratings on Indiabulls by three notches this week after the central bank rejected its proposal to combine with Lakshmi Vilas Bank. The merger would have helped the lender to access low-cost funds and tide over a jolt to India’s non-banking financial companies following shadow lending giant IL&FS Group’s collapse last year.

To contact the reporters on this story: Anurag Joshi in Mumbai at ajoshi53@bloomberg.net;Rahul Satija in Mumbai at rsatija1@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Ravil Shirodkar, Arijit Ghosh

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