Indian bank HDFC Bank’s subsidiary HDB Financial is raising $300 million in overseas loans. It is going to be the unit’s first-ever syndicated overseas loan and marks a shift in business strategy. According to a source close to the developments, the firm is trying to diversify its source of borrowing.
Reports suggest that the loan is going to mature in three years, and it is going to be priced 133 basis points higher than the London Interbank Offered Rate (LIBOR). LIBOR is an international standard for such loans. The source also added that HDB Financial has also started its syndication program, and it is going to conclude soon.
HDB Financial is being assisted by the State Bank of India, HSBC and the Bank of Baroda in its quest to raise this loan. That being said, dealers have revealed that even on a fully hedged basis, the loan should be on parity with domestic borrowings. Earlier on in March this year, it had been reported that HDB was going to sell its shares to raise $1.4 billion.
2019 has been a tough year for Non-Bank Financial Companies (NBFC) due to defaults from one of the biggest companies in the industry, IL&FS. It has resulted in many of the companies in the sector to seek foreign loans.
The rating agency CRISIL has prepared a note on HDB back on August 21 and stated that the company might be looking to expand into other services. The note stated, “HDB Financial has emerged as one of the larger players in the retail financing space, over the past few years. HDB Financial is now expanding into consumer durable financing, digital products loans, and other related segments.”