London Stock Exchange welcomes the first Masala bond issued by an Indian Corporate, HFDC

Housing Development Finance Corporation Ltd. (HDFC) has been the first corporate in India to issue Rupee Denominated Bonds (or Unsecured Synthetic INR Notes) overseas in July 2016.

The INR 30 billion issue bears a fixed semi-annual coupon of 7.875% per annum and has a tenor of 37 months. The bonds have been issued at a price of 99.24% of the par value and would be redeemed at par. The annualised yield to the investors is 8.33% per annum. This yield is five basis points lower than the last domestic issue by HDFC. This is a bond issue denominated in Indian rupees and there is no foreign exchange exposure for HDFC. The bonds have been listed on the London Stock Exchange (LSE) for trading in the secondary market on July 22, 2016. The joint lead managers of the issuance were Axis Bank, Credit Suisse and Nomura.
Mr. Deepak Parekh said,

“The listing of these bonds on London Stock Exchange gives us immense pride. Besides being one of the largest stock exchanges in the world, London Stock Exchange has a rich legacy which dates back to over 300 years. London Stock Exchange continues to distinguish itself by offering a wide range of financial instruments and enjoys unshakable trust from international investors. While we did explore other markets for listing, the responsiveness and efficiency with which the officials at the UKLA and London Stock Exchange responded to our urgent requirements was remarkable. Considering that this was the first issue of its kind in a global financial centre by an Indian Company, the authorities were forthcoming and supportive. We also appreciate the contribution and the speedy turnaround of the legal documents by Freshfields UK and AZB Partners and the role played by the trustees, paying agent and the common depository in achieving a time bound completion of the transaction.” 

The final order book was Rs. 86.73 billion from 48 accounts. The issue was oversubscribed, reflecting strong investor sentiment. The final allocations were well-diversified, with 86% taken by Asian investors while the European investors took the balance. About 82% of the issue was allocated to institutional investors and 18% to private banks.
HDFC has absorbed the additional cost on account of withholding tax in order to jump-start a new source of funding and also help create a new market for other Indian companies. In September 2015, the Reserve Bank of India, allowed Indian companies to issue Rupee Denominated Bonds. Subsequently, HDFC approved the issuance of Rupee Denominated Bonds with the objective of diversifying its borrowing profile, tapping global liquidity and fulfilling the demand from a large number of international investors. While HDFC raises funds from various sources, it is largely domestic. Further, it was felt that the issuance of such a bond will reinforce HDFC’s blue chip positioning and have a positive effect on the growing Indian bond market.
Mr Alok Sharma MP, Minister for Asia and the Pacific said,

"I very warmly welcome HDFC's choice of the London Stock Exchange to list this world-first rupee bond, a clear signal of London's standing as the leading international financial centre. The tremendous investor demand demonstrates the UK's pivotal role in financing India's growth and further strengthens the close economic ties between the UK and India. I am confident that this will pave the way for many more Indian companies to raise capital in London to support India's ambitious infrastructure plans. "Delivering on the commitments of Prime Minister Modi's historic visit to the UK, this launch reaffirms that the UK is a natural partner for India not only in our strong economic ties but also through the vibrant and 1.5 million-strong Indian diaspora in Britain." 

Quick facts

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Market: ISM
Instrument market cap (£m)
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Listing/Admission to trading
28 Mar 2019

HDFC Masala bond video

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