Dewan Housing's Rs10,000-cr follow-on NCD issue to open on Monday

Dewan Housing Finance Ltd (DHFL) is coming out with a fresh issue of non-convertible debentures (NCDs) to raise around Rs10,000 crore, after its Rs4,000-cr issue that closed earlier this month.

The NCDs of face value Rs1,000 each, come with maturities of 3 years, 5 years and 7 years and offer coupon rates of up to 9.25 per cent.

The NCDs have a base issue size of Rs2,000 crore and an option to retain oversubscription of up to Rs8,000 crore aggregating up to Rs 10,000 crore opens on August 29, DHFL said in a statement.

With the government taking several steps to grant housing finance companies better supply of funds for the low-cost housing sector, the company is tapping various funding sources innovatively at optimal cost, DHFL chairman and managing director Kapil Wadhawan said.

"Our first NCD public issue set new benchmarks in housing finance sector and our forthcoming follow on issue will seek to replicate the aggressive penetrative marketing to tap the pool of liquidity available in the market. While reducing our total cost of borrowing, this Issue will establish a strong yield curve for DHFL instruments in the market," he said.

The follow-on secured NCD Issue has a new issue structure with also the 7-year tenor with annual frequency of interest payment, he said, adding, interest rate on proposed NCDs varies between 9.05 per cent to 9.25 per cent.

The proceeds of the debenture issue will be used for repaying part of the high-cost debt and also for business expansion.

DHFL, which had a loan exposure of around Rs32,750 crore as of end-June 2016, has brought it down to levels around Rs29,000 crore after the previous debt issue.

DHFL has a total loan book of about Rs63,000 crore while its loan exposure stands reduced from 52 per cent to 46 per cent after the NCD issue, officials said, adding that the company aims to bring this further down to about 35 per cent in about two years.

Together the two debt issues will help DHFL to bring down its cost of funds by about 20-25 basis points, against the current level of 9.45-9.5 per cent, according to Harshil Mehta, CEO.

DHFL is encouraged by the success of its earlier issue of bonds for Rs4,000 crore, which received subscriptions of about Rs19,000 crore. The issue with an initial offer size of Rs1,000 crore had a green shoe option to retain up to Rs3,000 crore from the total subscriptions.

The DHFL bonds, the largest public offer of bonds by a private entity in the Indian market, was also the first bond offering with an option of interest payments linked to consumer price index.