The central government would surely envy the country's largest mortgage lender HDFC Ltd which has managed to raise Rs 4,000 crore from two large private sector banks at a rate of 7.25 per cent, which is just 135 basis points over and above the long-term central government securities rate.
"It's a very good interest rate given the uncertainty in the economy and also the industry post Covid lockdown,"says a debt dealer.
The current yield on a 10 year G-Sec is around 5.90 per cent. There is, however, a likelihood of this rate touching 6 per cent or going even beyond because of a large supply of government paper in the market on account of higher borrowings this year.
This week states like Goa, Telangana and Rajasthan paid around 6.6 per cent for 10 year state development bonds.
The HDFC Ltd which is a triple A rated corporate got this money from two large private sector banks -- ICICI Bank and Axis Bank Ltd. Axis Bank took the largest share of Rs 2,650 crore while ICICI Bank put in Rs 1,350 crore.
The Mumbai-headquartered NBFC, which is also a holding company for HDFC Bank, HDFC Life , HDFC Ergo among other companies, has raised the money through non-convertible debentures. These debentures would be redeemed after a period of 10 years. The longer term funds are much needed in the NBFC space as it brings stability in asset liability management. In many NBFCs, the liabilities are short term, while the assets (home loan) are long term in nature.
The risk averse banks flush with funds are comfortable investing in the debt paper of good investment grade companies. The recent raising of money by HDFC Ltd and Reliance Industries would act as a benchmark for corporates with strong balance sheet to negotiate interest rate with banks via debentures for raising short as well as long-term funds.
The HDFC Ltd is in the market to raise around Rs 14, 000 crore post covid outbreak. The housing major is building capital buffers especially raising long term resources. The new money would be utilised for financing new business and refinancing old loans,
Early this month, HDFC raised Rs 5,000 crore from ICICI Bank, PNB Gilt, UTI and few mutual funds. It raised money via debentures at 6.22 per cent for less than 2 years. The current low interest rate environment offers a good opportunity for strong corporate and institutions to borrow at a good rate.
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