Housing Development Finance Corporation (HDFC) created history on Monday when masala bonds raised by the Indian mortgage lender were listed on the London Stock Exchange (LSE). The bonds received a good response, with bids worth Rs. 8,700 crore on debut.
HDFC Chairman Deepak Parekh and CEO Keki Mistry were present on the historic day at the LSE.
Masala bonds are rupee-dominated bonds raised outside India. HDFC was the first Indian company to do so when it raised Rs. 3,000 crore in masala bonds at a coupon rate of 7.875 percent per annum. The bonds have a tenor of three years and one month. At an issue price of Rs. 99.24 per bond of the par value, the effective yield on the bonds is 8.33 percent per annum.
The success of the masala bond issue has generated phenomenal hunger among global sovereign wealth funds (SWFs) for such debt offerings in the future.
"We are getting calls from SWFs around the world, saying 'the next 20 billion, just give it to us'", Parekh told Reuters.
The success of the maiden masala bond issue by an Indian company would set a similar trend among other Indian firms, notwithstanding the 5 percent tax deduction at source (TDS) clause (also called withholding tax) that can raise the cost of borrowing for the issuer.
The bonds won't be traded on Indian stock exchanges.
The maiden masala bond issue was lapped up by many foreign investors, making HDFC express confidence over the successful placement of the debt programme.
"This is a milestone transaction for HDFC. We have successfully achieved our objective of attracting a global pool of capital to further diversify our borrowing profile. The positive investors response towards this issuance reinforces the blue-chip positioning of HDFC and establishes a significant landmark for Indian companies," Parekh had said in a regulatory filing on July 14 to the Bombay Stock Exchange (BSE).
From an investor profile perspective, 86 percent of the final allottees were Asian and European investors. While 18 percent of the investors were banks, the rest were institutional investors, HDFC had said in a statement.
On Tuesday, HDFC shares were trading at Rs. 1,338.45 apiece on the BSE at around 12.46 p.m., down 2.62 percent from their previous close. HDFC Bank shares were flat at Rs. 1241.70 apiece.
The Sensex was trading about 50 points higher at 28,024.