HDFC Bank plans to sell perpetual bonds worth up to Rs 50,000 crore, with India’s most valued lender seeking its board’s approval through an enabling resolution for the capital raising.
“To issue unsecured perpetual debt instruments (part of additional tier I capital), tier II capital bonds and long-term bonds (financing of infrastructure and affordable housing) on a private placement basis, and in this regard to consider and, if thought fit, to pass the following resolution, as a Special Resolution,” the Mumbai-based HDFC Bank told stock exchanges in a customary filing.
Earlier, speculation was rife that the bank would raise Rs 13,000 crore via share sale.
Perpetual bonds are hybrid securities that do not have any fixed maturity. An issuing bank can skip interest payment if its capital falls below the regulatory requirement when the interest falls due. Perpetual bonds are quasi-equity instruments that help shore up equity capital.
An outbreak of the pandemic has raised the capital needs at many banks. Bad loans are expected to rise, forcing lenders to make higher provisions that eat into profit margins.
HDFC bank’s capital adequacy ratio stood at 18.5% at the end of March this year. During the period, the lender’s gross and net bad loan ratios were at 1.26% and 0.36%, respectively, which are a bit better than the levels a year ago.