HDFC to issue India’s first rupee-denominated ‘Masala’ bonds

Published on: 12 July 2016 8:29 AM GMT
HDFC to issue India’s first rupee-denominated ‘Masala’ bonds

Mumbai: Housing Development Finance Corporation (HDFC) has decided to raise bonds worth rupees 200 crore to launch India’s first ‘Masala Bond Issue’ with an option to retain an amount of another 1,000 crore worth over-subscription.

Country’s largest mortgage company has hired Axis Bank, Credit Suisse and Nomura as lead managers for its first under rated rupee note.

What are Masala Bonds:

  • The masala bonds are in the form of synthetic rupee notes.
  • The instruments are called synthetic because they are not 'real' rupee bonds but foreign currency bonds structured so that the returns would be as if the investor has invested in rupees in a local bond.
  • The International Finance Corporation, the investment banking arm of the World Bank, was the first to issue rupee-denominated bonds, which it named masala bonds.
  • HDFC is the first Indian public issuer of these bonds.
  • "The bonds will bear a fixed coupon and will have a tenor of 3 years and 1 month. The corporation proposes to list the notes on the London Stock Exchange. Pricing will take place on or before Friday, July 15, 2016, subject to market conditions," a statement issued by HDFC Said.

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The bonds could not be floated in US securities market:

The bonds will not be registered under the US Securities Act and hence, will not be offered for sale and purchase within the US securities market.

What HDFC officials said:

HDFC chairman Deepak Parekh said, "HDFC is keen to diversify its borrowing profile by tapping global investors through this issue of rupee-denominated bonds. This milestone issuance, the first of its kind, should validate the attractiveness of the instrument and set a good benchmark”.

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