HDFC Bank eyes record Rs 50,000 crore raise via bonds

MUMBAI: Two days after announcing a plan to amalgamate parent HDFC with itself, HDFC Bank said that it is seeking board approval for raising Rs 50,000 crore through the issue of bonds. Reaffirming the bank’s rating, Moody’s said that the deal would hit profitability in 2-3 years driven by higher funding costs and increased reliance on market borrowing in the near term.
HDFC Bank said that it proposes to raise funds by issuing perpetual debt instruments (part of additional tier I capital), tier II capital bonds and long-term bonds (financing of infrastructure &affordable housing) up to the total amount of Rs 50,000 crore — its biggest ever issuance — over the next 12 months through private placement mode. “The board would consider this proposal at its ensuing meeting to be held on April 16, 2022,” the lender said.

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According to analysts, HDFC Bank will need to raise funds to meet reserve requirements on the expanded balance sheet following the amalgamation of HDFC’s business with its own. The reserves include the funds that need to be parked with the RBI in the form of cash reserve ratio requirements and the money that has to be mandatorily invested in government securities as part of the statutory liquidity ratio requirement.
Analysts say that the bank would need to expand its government bond portfolio by around Rs 80,000 crore after the merger. While a part of this is already owned by the mortgage company, it will still need to make large investments. Also, HDFC has a large fixed deposit programme where it offers rates better than banks on long-term fixed deposits.

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