HDFC Bank first among peers to tap masala bond route

Mumbai: HDFC Bank, among the world’s most valuable commercial lenders, Thursday became India’s first highstreet bank to draw about Rs 2,300 crore in an attractively-priced masala bond sale that signals the revival of overseas demand for local debt paper.

Denominated in rupees instead of dollars, the HDFC Bank paper was oversubscribed nearly two times, said two people aware of the sale. There were about 40 investors in the bond-sale from Europe and Asia.



“HDFC Bank has retained oversubscription partly,” one of the persons cited above told ET.

The bonds are of seven-year maturity and offered 8.10%, 5 bps less than its initial guidance, said a banker with direct knowledge of the matter. Global investors normally buy masala bonds because they earn better rates on them than in dollar-denominated bonds, but investors carry the exchange-rate risks.

Barclays, Standard Chartered Bank, and HSBC are some of the bankers that helpedHDFC Bank raise the money. Bonds will be listed on the Singapore Exchange Securities.

Rating company Moody’s Investors Service has assigned a Baa2 rating to HDFC Bank’s proposed bond sale. The grade is one notch higher than the investment grade. The bonds are issued under the bank’s USD3 billion Medium Term Note (MTN) programme.

“HDFC Bank’s deposit and senior unsecured ratings could be upgraded, if India’s sovereign rating is upgraded,” Moody’s said in a note.

Baa2 reflects the bank’s standalone credit strength and prudent underwriting policies, which have led to its superior financial performance when compared with similarly rated peers in India.

HDFC Bank reported a 20% increase in its December-quarter net profit at Rs 4,642.6 crore. Total loans increased 27.5% y-o-y to Rs 6,31,215 crore, with retail and wholesale loans rising 28.7% and 26.4%, respectively. Total deposits increased 10% Rs 6,99,026 crore.

HDFC Bank shares climbed about 1% to Rs 1,880 Thursday.