MUMBAI: The country’s top mortgage lender, Housing Development Finance Corporation, has lit up the lacklustr e bond street with the financial year’s largest private bond deal, signaling improving investor sentiment towards the housing finance sector. An overwhelming response to an earlier sale of perpetual bonds by State Bank of India too helped turn the sentiment that was weak until recently due a combination of global and domestic factors. HDFC’s Rs 9,000 crore bond sale received bids worth Rs 13,000 crore, or nearly one-and-a-half times the issue size, three people familiar with the matter told ET.
The company rejected the addition amount. The Employees’ Provident Fund Organisation (EPFO), ICICI Bank, Axis Bank and Kotak Mahindra Bank are said to have invested in these bonds, the people said.
Axis Bank is estimated to have purchased Rs 2,500 crore of the paper, while ICICI Bank may have bought Rs 1,500 crore of bonds and Kotak Mahindra Bank about Rs 500 crore.
Information on EPFO’s purchase wasn’t available. Emails sent to Axis Bank, Kotak Mahindra and ICICI Bank remained unanswered until the publication of this report.
EPFO couldn’t be contacted immediately. Insurers like ICICI Lombard and a few mutual funds were also said to have invested in the HDFC paper. The bonds offered 9% with a 10-year maturity.
These were sold through the electronic bidding platform of stock exchanges. “HDFC’s bond sale, which was the largest in quantum this financial year, has moved the drying up bond street,” said Ajay Manglunia, executive vice president at Edelweiss Financial Services.
“Bids have come larger than expected.
Also, one SBI bond sale elicited better response.” “Both the bonds are yielding lower in the secondary market by 10-15 bps (basis points) indicating investor exuberance,” he said. Earlier this week, SBI raised Rs 4,000 crore via perpetual bonds, which have no fixed term of maturity and are a quasi-debt instrument.
The state-run bank received two-and-a-half times more subscriptions at Rs 10,000 crore.
It too rejected the additional amount. SBI bonds were supposed to offer 9.75% initially, but settled at 9.56% due to the huge investor interest. Both bonds have rallied in the secondary market immediately after listing. HDFC bond yield dipped 13 basis points to 8.87%, while SBI bonds are now yielding 11 basis points lower at 9.45%, giving investors mark-to-market gains on their holding.
Bond prices and yields move in opposite directions.