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Banking industry

HDFC Bank Raises $1 Billion in Largest Sale of Overseas AT1 Bonds by an Indian Lender

Strategic Insights

— 1 min read

HDFC Bank, India's largest private lender, has successfully raised $1 billion in the largest sale of overseas additional tier-1 (AT1) bonds by an Indian bank. The robust demand for the bonds, which was $4.5 billion, indicates that overseas investors have ignored concerns about the AT1 bonds that arose after the Reserve Bank of India (RBI) extinguished Rs.8,415 crore worth of such securities after seizing Yes Bank Ltd as part of a bailout. The sale of AT1 bonds is seen as a way for banks to strengthen their balance sheets and tap into the global debt markets, which have been offering low interest rates.

Key Takeaways:

  • HDFC Bank raised $1 billion in the largest sale of overseas AT1 bonds by an Indian lender, with a demand of $4.5 billion.
  • The bonds were priced at 3.7%, lower than the initial price guideline of 4.125%.
  • Major investors that participated in the bond offering include Singapore's state investor GIC, American institutional investors Blackrock and Fidelity, and others.
  • The success of HDFC Bank's AT1 bond sale is seen as a potential catalyst for other Indian lenders to explore similar offerings in the overseas market.
  • AT1 bonds, also known as perpetual bonds, carry no maturity date but have a call option.
  • HDFC Bank's success may encourage rivals to tap into the offshore debt markets to raise money and diversify their funding sources.

Statistics:

  • $1 billion: Amount raised by HDFC Bank in the largest sale of overseas AT1 bonds by an Indian lender.
  • $4.5 billion: Total demand for the bonds.
  • 3.7%: Final pricing of the bond, lower than the initial price guideline of 4.125% .
  • Rs.8,415 crore: Worth of AT1 bonds extinguished by the RBI after seizing Yes Bank Ltd.
  • 2016: Year when State Bank of India (SBI) was the first lender to raise capital through offshore AT1 bonds.
  • 2021: Year when SBI announced its plan to raise AT1 capital through a public offer or private placement.

Sources:

Livemint, Mumbai, Aug. 19.

Hindustan Times.

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