India's largest housing finance firm, HDFC, has completed the largest-ever sale of rupee bonds, generating £2.5 billion through 10-year non-convertible debentures with a 7.97% coupon rate. The bond yield translates into a spread over the closing yield on 10-year government securities of 49 basis points (100bps = 1 percentage point).
With the option to retain subscription for an additional £2.5 billion, HDFC launched the issue last week to raise £500 million. Insurance companies, pension funds, provident funds, banks, and mutual funds submitted 92 bids totaling £2.78 billion, of which the company retained 55 investor bids totaling £ 2.5 billion. According to investment bankers, the rush for long-term bonds despite a reduction in money market liquidity indicated that there was a big demand for triple A-rated paper with respectable returns.
HDFC executive director V S Rangan, said “demand in the housing sector continues to be strong across all categories. The penetration level of housing in India is one of the lowest in the world. India’s mortgage-to-GDP ratio is about 11% compared to over 20% in many other emerging markets and more than 60% in some of the advanced economies. On a sustainable long-term basis, the demand is expected to remain strong.”