HDFC looking to raise Rs 400 crore through bonds from private placement

MUMBAI: HDFC is looking to raise Rs.400 crore through an eighteen month bond, placing the bonds privately.

The bonds will carry a coupon rate of 9.75%. Debt analysts say, the non banking finance company has got a fine rate, given its brand value.

According to data from Prime Database, in the month of April, only 12 issuances happened in the private bond market, as companies are still the process of finalizing their borrowing needs for the next financial year. The highest issuances were in the month of February, when there were about 121 issuances totaling to Rs.27214 crore worth of issuance, while there were no public debt issues in April.

The yields on corporate bonds are linked to yields on government securities, and the spread or the difference in yields generally is around 80-100 basis points.

But due to lower number of issuers in the market, the yields on corporate bonds have not moved as much as the yields in government bonds have rallied. Thus the spreads have shrunken to 60-65 basis points. Each basis point is one hundredth of a percentage point.

The yields on benchmark 10 year government bonds have risen from 8.34% on April 17 to 8.63% now.

Market analysts had anticipated a rally in the yields and therefore an opportunity to make profits, by selling the bonds at higher prices.

But inspite of the Reserve Bank of India cutting policy rates by 50 basis points, the yields have steadily inched upwards due to supply pressure.