Smart Cities Boost for HDFC Issue : The Economic Times

Mumbai:

FUND FLOW Company has raised Rs 2,000 crore, twice the amount planned, via sale of bonds

The government's announcement of 98 smart cities on Thursday has renewed investor confidence in India's largest housing finance major HDFC as the company has raised`. 2,000 crore via bond sales, double of what it had planned initially, four people familiar with the matter told ET.

One of India's top debt investors has subscribed a bulk amount along with a large state-owned bank in the triple-A rated entity , they said.

“HDFC's business is definitely going to gain from smart cities, which bring the need of housing along with infrastructure,“ said Ajay Manglunia, head, fixed income, Edelweiss Securities. “In a falling rate regime, HDFC yield gives investors an entry via primary market to buy a big quantum at a level.“

With five-year maturity , the issue yielded at 8.50%, which is about 47 bps higher than similar maturity government security . The gap, or spread, is now about 55-60 bps on an average in the secondary market.

With softer inflation in sight, the RBI is expected to reduce the benchmark rate by another 25-50 bps this year. Consequently , yields would dip, pushing prices up. Investors can book profit or stay invested to protect yield in the portfolio.

The government on Thursday released a list of 98 cities which are to be developed as smart cities, bringing into play a lot of infrastructure work. Prime Minister Narendra Modi-led government has planned to spend about ` . 3 lakh crore over the next five-six years to develop cities, opening up huge business opportunities for many companies.

“Even after market uncertainty in the past two weeks, HDFC has managed to raise good quantum of funds and spread,“ said Ashish Jalan, assistant vice-president at SPA Securities.

A week ago when the benchmark bond was yielding lower than now, LIC Housing Finance had raised . 500 crore at 8.53%.` “We see some compensation from the uptick in one, housing demand in Tier-I cities and two, corporate loan growth from 9% YoY in FY14 to 14% in FY15,“ CLSA said in a report giving a `buy' call on HDFC shares.

HDFC shares jumped more than 8% to close at ` . 1,195.20 at the BSE on Thursday.