HDFC Bank Plans to Come up With a Bonds Issue

HDFC Bank is one of the best performers in the banking sector. The company is looking to raise Rs.50,000 crore from the bond issue, which will spread over a period of the next 12 months. The time might look ripe for the bank to get the necessary funds since the stock markets are trading close to the lifetime highs in most of the countries. Incidentally, the financial service provider is also engaged in expanding its businesses by aligning with Amazon for providing EMI options to its debit cardholders.

Board to Decide

The company will list the item for approval during a board meeting that is scheduled to take place on April 21. This has been disclosed in a filing with the Securities Exchange Board of India (SEBI). The bank indicated that the funds would come from the way of issuing Perpetual Debt Instruments, which is a part of Tier one capital. This apart there will be Tier two capital bonds and long-term bonds for a maximum of Rs.50,000 crores. The third category is meant to finance infrastructure, as well as, affordable housing.

Significantly, the issue will not be either public or rights issue to the existing shareholders. The issue or the funds would be raised from private placement mode. The bank indicated that once its board takes a decision on the matter, it will keep both the stock exchanges, i.e., Bombay Stock Exchange and National Stock Exchange, informed about it.

The latest announcement comes after HDFC Bank announced its partnership with Amazon to provide payment with the help of EMI option primarily to its debit cardholders. However, this service would be available only on purchases of more than Rs.10,000. The process will be simple for the cardholders as once the consumer decides to use the scheme, then he or she would be provided with a pre-approved loan. That would be used to make payment for the purchases.

For its part, the American firm is eager to ease the shopping experience of its customers since a customer would have to check out the option and choose their preferred EMI option. The tenure of such pre-approved loans would range between six months and 12 months. Currently, this will help millions of HDFC Bank customers as Amazon Pay is simplified for the seamless shopping experience.

Not Involved In Any Scam

One of the highlights of HDFC Bank performance is that it has never aligned with doubtful transactions. Alternatively, it has not involved in any of the big scams. For instance, ICICI Bank CEO was dragged into a conflict of interest controversy. Though the company has been providing provisions for bad loans, it is not as alarming as one would have thought it to be.

The recent news of scams or frauds involving Punjab National Bank has dragged down the confidence of investors for banking stocks. Though most of the banks suffered in the process, HDFC Bank was able to buck the trend and still continues to be investors’ darling. That also suggests that the company is not worried about investors’ sentiments and confident of raising the targeted amount.

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