DHFL, the flagship company of Wadhawan Global Capital (WGC), would seek to mop up Rs 1,500 crore. Those papers could offer 9.88 per cent quarterly with three-year maturities, multiple market sources told ET. Rating company Care has rated the issuance triple-A, with a stable outlook, the top grade.
State Bank of India is also seeking to raise up to Rs 5,000 crore.
State Bank did not comment on the fundraising. DHFL informed market participants about the proposed sale in a note.“Such bond deals will add to investor confidence,” said Lakshmi Iyer, CIO-fixed income, Kotak Mutual Fund. “The market is currently going through the crisis of confidence, leading to a dry spell in bond sales. Mutual funds are mostly sitting on cash.”
Investors can surrender the DHFL issue after one year while the issuer too can withdraw it after the stipulated period. A large bank or an insurance company is expected to buy the majority of the DHFL bonds, which open for sale Thursday.
“The company is in talks with many banks, mutual funds and insurers. The bond sale is likely to go through giving liquidity support to the company,” said an executive with knowledge of the matter.
DHFL will have to repay its short-term debt as commercial papers are maturing next weeks. Mutual funds are investors there.
The State Bank of India, on the other hand, is proposing to sell tier-II bonds, compliant with international capital standards, after a gap of about one and a half years. Tier-II bonds are the debt component of a bank’s capital. The lender is back on the bond street with a Rs 5,000-crore issue. Its base size is Rs 2,000 crore, with an option to retain subscription up to Rs 5,000 crore. The bonds are expected to offer 8.80-9 per cent.
These tier-II bonds would have 10-year maturity with a call option after five years. A call option allows the issuer to withdraw bonds, repaying investors proportionately well before the actual maturity.
“The bank finds it an opportune time to expand credit with all non-banking companies contracting their loan disbursals,” said a senior executive from a financial institution that deals with SBI.