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HDFC Bank, the country’s largest lender by market value and the biggest Nifty constituent by weighting, has doubled its overseas borrowing through a term loan syndication from a clutch of 23 global banks in a greenshoe option to the primary facility, having initially borrowed $500 million from Japan’s largest lender MUFG in December.

HDFC Bank, which merged its mortgage lending parent into itself last year, chose to exercise the green shoe option to raise another $500 million, taking the total proceeds to $1 billion in what is the largest three-year overseas loan organized by an Indian bank.

“The syndication was completed on Thursday and the full green shoe option was exercised by HDFC Bank due to the strong demand from foreign banks,” said a person aware of the deal. “Banks from Asia, Middle East and Europe participated in this syndication, which is the largest three-year syndication by an Indian bank for general corporate purposes.”

HDFC Bank had raised $500 million from MUFG Bank in December. The money raised would be used by India’s most-valued lender to shore up its liabilities after acquiring parent HDFC last year.

The loan was priced at 110 basis points above the three month Secured Overnight Financing Rate (SOFR), which was trading at around 5.35% in December 2023, meaning HDFC Bank paid about 6.45% for the three-year loan. One basis point is 0.01 percentage point.

MUFG was the sole bank mandated with the loan that was financed through the Japanese lender’s Gift City branch.

“At the syndication stage, MUFG chose to keep only $150 million with it while the rest was sold to other lenders from countries such as Taiwan, Japan and Saudi Arabia, among others. Other lenders also came in the syndication stage ,which resulted in the bank finally borrowing a total of $1 billion,” said the person cited above.

Emails sent to HDFC Bank and MUFG did not elicit any response.

Among the banks that participated in the syndication were Taipei Fubon and Bank of Taiwan, both from that country, Saudi National Bank, Bank of China and CIMB Bank from Malaysia. ET could not ascertain the names of all the banks that participated in the syndication.

HDFC Bank has had to increase its liabilities and funding to match the maturity profile of its parent HDFC, which was merged with the bank effective July 1 2023.

Slow deposit growth has impacted most Indian private sector banks. For HDFC Bank, the impact is more visible as it has to match the deposit growth with the asset growth from the merger of its parent. Aggregate loan to deposit ratio (LDR) is near a two-decade high of 80% as bank loan growth outpaced deposit growth. For HDFC Bank, it was at 110% at the end of December, mainly due to the merger, though the bank expects the ratio to progressively trend down.

In a January report, Macquarie Capital said HDFC Bank needs to expand its deposits at 400 basis points higher than loans to get back to the net interest margins that existed pre-merger over the next three years, and simultaneously get rid of low yielding corporate loans and focus on improving the retail mix and high yielding loans.

  • Published On Mar 23, 2024 at 11:57 AM IST

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