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Indiabulls Housing Finance Concludes Maiden Dollar Bond Issue

Indiabulls Housing Finance Ltd. concluded its first dollar bond issue late on Tuesday.

Laborers clean windows near signage for Yes Bank Ltd. at the Indiabulls Finance Centre in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
Laborers clean windows near signage for Yes Bank Ltd. at the Indiabulls Finance Centre in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Indiabulls Housing Finance Ltd. concluded its first dollar bond issue late on Tuesday, joining a list of non-bank lenders tapping foreign debt to tide over tight liquidity conditions at home.

Indiabulls Housing Finance raised $350 million through the issue, according to information put out by Bloomberg. The issue was closed at a coupon rate of 6.375 percent, Bloomberg said quoting people familiar with the matter. Together with the cost of hedging, Indiabulls Housing Finance would roughly pay 11 percent for the funds raised.

Indiabulls Housing Finance is the latest non-banking financial company to raise funds via dollar bonds. Tight credit markets locally have pushed NBFCs to raise funds via public debt issues and overseas borrowings. While overseas borrowings open up an additional funding route, such debt also exposes NBFCs to foreign exchange risk.

Those who have tapped the overseas markets in recent months include HDFC Ltd., Cholamandalam Investment and Finance Company Ltd., Shriram Transport Finance Ltd. and Piramal Capital and Housing Finance Ltd.

The funds raised by Indiabulls Housing Finance were at a higher cost compared with peer Shriram Transport Finance, which also tapped the dollar bond market for the first time this year. While Shriram Transport Finance raised funds for a little over three years at a cost of 5.95 percent in dollar terms, Indiabulls Housing Finance is paying a higher coupon rate of 6.375 percent.

According to Bloomberg, the bond issue comes with strict covenants attached. Net non-performing assets as a percentage of gross advances shall be less than 5 percent. The minimum security coverage ratio, which measures the company’s debt obligations against its assets, shall not be less than 1:1.

Indiabulls Housing Finance was among the NBFCs which faced liquidity troubles, although the company now believes conditions have stabilised.