Most Valuable India Bank Plans Largest Perpetual Debt Offering

(Bloomberg) -- HDFC Bank Ltd. is planning India’s biggest offering of perpetual debt as it seeks to bolster capital after missing a world-beating streak of profit growth that lasted two decades.

The proposed 50 billion rupees ($780 million) worth of notes, which don’t have a maturity date, are the lender’s first under Basel III norms, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. The bonds carry a coupon of 8.85 percent, the lowest pricing on such debt issued by any Indian lender in 2017, data compiled by Bloomberg show.

“HDFC using the headroom to raise funds at this point shows the management is confident of spurring loan growth,” said Diksha Gera, a Bloomberg Intelligence analyst in Singapore. “From a shareholder perspective, a bond issuance is a cheaper source of capital than raising equity. That helps strengthen the regulatory capital ratio for the bank.”

The lowest bad-loan ratio among top Indian banks and fast lending growth had helped HDFC Bank, helmed by Aditya Puri, report annual profit growth of more than 20 percent in the two decades through to last year -- a feat unmatched by any of the world’s 200 biggest lenders, data compiled by Bloomberg show. Profit in the year ended March 31 grew 18.3 percent, bucking the trend, as provisions for soured debts rose.

The notes, rated AA+, have a call option at the end of five years. The bank’s board last week approved issuance of 500 billion rupees of debt comprising perpetual, tier-2 and long-term infrastructure bonds over the next year.

To contact the reporters on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net, Anto Antony in Mumbai at aantony1@bloomberg.net.

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Ravil Shirodkar, Chan Tien Hin