HDFC in talks with LIC to raise Rs 10,000 crore via local bond sales: Report

Housing Development Finance Corporation (HDFC) is in talks with LIC India to raise Rs 10,000 crore via local bond sale, this week. The fundraising will help in a revival of credit demands for new homes, according to a report by The Economic Times.

The bonds will be for 10 years offering an interest rate of 7.25 per cent-7.35 per cent and the bidding is likely to take place on Tuesday, sources told the publication. ICICI Bank is set to arrange for the bond sale. "LIC of India has received internal approval for the proposed investment," the source was quoted as saying.

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HDFC is aiming to raise the funds before there is a surge in yields. In the past two weeks, benchmark bond yield has risen by 16 basis points. On December 1, HDFC had raised similar 10-year bonds which offered 7.05 per cent interest rate, when the benchmark yield was at 6.35 per cent.

The differential was at 70 basis points then and is expected to be in the range of 45-55 points this time, benefitting the borrower. "Loan demand is back in full swing. Hence, the company needs to arrange resources well in advance," a senior executive was quoted as saying.

Debt papers are on offer with a base size of Rs 500 crore and give an option to retain subscriptions up to Rs 10,000 crore. ICRA and Crisil gave these papers triple-A ratings.

There will be a bidding process for the final coupon and this could leave LIC owing more than three quarters of the issue size, leaving only a small portion for the other bodies. Employees' Provident Fund Organisation (EPFO) and some standalone PFs are expected to bid to win those papers. Allocation is to be finalised on basis of bids received electronically on the platform.

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