HDFC may raise $ 500m

Housing Development and Finance Corporation (HDFC) plans to raise funds from the international market once liquidity improves and interest rates slide, Keki Mistry, vice-chairman and managing director, told DNA Money.

He said raising funds won’t be desirable now as international rates are high.

“Money is the raw material for us. Right now credit swaps are high, but in the next 3-4 months as liquidity improves we will consider whatever amount, may be $300-500 million. We will also need regulatory approval,” Mistry said.

A credit default swap is the cost of protection against default. It is a contract between two counterparties, where one bank pays a premium to another to transfer its obligation to creditors in case of a default. Higher swaps means higher the risk of default because of which the borrower has to pay a premium on rates.

Credit swaps on Indian paper overseas have come off after touching highs in October. For example ICICI Bank’s credit swaps are down to 578 basis points after touching 1794 bps in October 2008.

Mistry said HDFC will raise money from abroad only when “the costs are equal to or lower than the domestic market on a fully hedged basis.” The company raises money from the domestic market on an ongoing basis. In November it raised Rs 800 crore at 11.95%.