HDFC to Raise $17 Billion in Bonds After Profit Beats Estimates

Housing Development Finance Corp. plans to raise as much as $17 billion in bonds after India’s largest mortgage financier posted a better-than-expected rise in fourth-quarter profit.

The Mumbai-based shadow lender’s fourth-quarter net income rose 43% to 31.8 billion rupees ($432 million) as it set aside fewer provisions for bad loans, it said in a statement on Friday. That beat an average estimate of 29.2 billion rupees of 11 analysts surveyed by Bloomberg.

While the virus has impacted HDFC less than its peers, India’s shadow lending sector has been significantly weakened since 2018 with the failure of a large infrastructure financier. A second deadly coronavirus wave has also led to local lockdowns, hurting businesses and jobs. The central bank announced a new round of measures this week to help lenders and businesses through the surge in infections.

Shares in HDFC rose 2.4% after the earnings announcement, outpacing a 0.22% rise in the main banking gauge.

Fund Raising

HDFC’s board approved a plan to raise as much as 1.25 trillion rupees of bonds in the current financial year, it said. The company has 217.4 billion rupees of bonds maturing this year, according to data compiled by Bloomberg.

“This is the best time to keep some extra headroom to borrow more from debt capital markets given the low interest rate regime,” said Ajay Manglunia, managing director and head of institutional fixed income at JM Financial Ltd. “In these days, when one doesn’t know how long the coronavirus wave will go on, it is good to have adequate capital to meet maturity payments, growth and any sudden requirements.”

Interest income fell slightly to 104.5 billion rupees from 109.6 billion rupees a year ago.

HDFC set aside 7.2 billion rupees in provisions for impairments, compared with 12.7 billion rupees a year earlier. Lenders have been reducing bad loan buffers after setting aside significantly large pots of money a year ago to boost profitability and provide for lower interest earnings.

©2021 Bloomberg L.P.

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