HDFC raises $1.1 bn ‘social loan’ via ECBs

Housing finance major HDFC Ltd. has raised around $1.1 billion (₹8,700 crore) 'syndicated social loan facility’ for the financing of affordable housing in India from a clutch of investors. The transaction marks India’s largest social financing issuance, and the first social external commercial borrowings (ECB) loan out of India, says the mortgage lender.

The loan has been priced at a margin of 90 bps over a secured overnight financing rate (SOFR). HDFC says the proceeds from the social loan would go towards financing affordable housing loans.

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities. As per the RBI, such loans should conform to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

"Since its inception in 1977, HDFC has financed 9.5 million housing units and has a gross loan book of ₹6.7 lakh crore. HDFC has been considered as a model for housing finance for countries with nascent mortgage markets," says an HDFC exchange filing.

MUFG Bank, Ltd. (MUFG) was the lead social loan coordinator for the transaction, along with being one of the Mandated Lead Arranger and Borrowers (MLAB). CTBC Bank, Co., Ltd., Mizuho Bank, Ltd., State Bank of India and Sumitomo Mitsui Banking Corporation are the other MLABs and joint social loan coordinators.

"HDFC’s social financing framework is in line with globally-recognised social loan frameworks designed for participants in the sustainability financing market to consistently certify, track and monitor the social impact of financing assets," says the company.

Deepak Parekh, chairman, HDFC Ltd., says affordable housing is a critical component of quality infrastructure and a growth driver for the real estate industry and the economy at large, given its strong linkages to nearly 300 industries.

"It contributes to capital formation, employment, and income opportunities. A boost to affordable housing will play a significant role towards the ‘Housing for All’ objective of the government. The aspiration to own a home is inherent in every household,” he adds. As per Parekh, housing will play an important role as a catalyst for growth, with increased demand for affordable housing.

In line with the sector, the HDFC stock declined 0.28% or 6.65 points to ₹2,352.75 today. The stock has been losing for the last two days and has fallen 0.57% in the period. The stock is trading higher than 20-day, 50-day and 100-day moving averages but lower than 5-day and 200-day moving averages. In one-year return, the HDFC stock has underperformed the benchmark Sensex by 18.69%.

House finance major HDFC Ltd has reported 22% year-on-year growth in standalone profit for the quarter ending June 30, 2022, at ₹3,669 crore on growth in individual disbursements, stable margins and an increase in AUMs. The company's consolidated profit for the quarter ended June 30, 2022, stood at ₹5,574 crore.

HDFC’s net interest income (NII) for the quarter ended June 30, 2022, saw marginal growth at ₹4,447 crore compared to ₹4,125 crore in the previous year. As of June 30, 2022, HDFC’s assets under management (AUMs) stood at ₹6,71,364 crore against ₹5,74,136 crore in the previous year; individual loans comprise 79% of the AUMs.