Housing Development Finance Corp is set to become the first Indian borrower to take advantage of the central bank's relaxed norms on external commercial borrowings, upsizing its foreign loan to around $1 billion from $750 million earlier, Funding costs will remain the same. The proceeds will be used by the country's biggest mortgage lender to lend to buyers of low-cost affordable homes.
The State Bank of India is said to join the syndication process that already has confirmed participation from Mizuho Bank, MUFG and Standard Chartered Bank, the people cited above said.
The loan term has been finally fixed at three years. The loan could be priced after adding about 115 basis points over the Secured Overnight Financing Rate (SOFR), a global rate gauge. HDFC faces robust demand for home loans, raising the need for more borrowing resources.
HDFC was planning to raise $750 million via an offshore loan, which is likely to be its last ECB before it is merged with HDFC Bank. The six-month SOFR is yielding about 2.60% now. If the borrower hedges the entire funds, it may have to fork out up to 470 basis points additionally going by current cost of currency risk covers in the forwards market.
The central bank last week approved HDFC's merger with HDFC Bank. It has a gross loan book of $86.15 billion, with individuals making up about four-fifths of the size. Individual loan disbursements climbed 37% year-on-year in FY22, partly aided by growth in the high-income group. "Overall, we are positive on HDFC's merger with HDFCB; however, over the medium-to-long term, the strategy on scale-up of housing loans, PSL(priority sector lending) and liability generation playing out will be the key to watch," IIFL Securities said in a note on June 21.