Hudco has secured a 60 billion-yen (USD 448 million) loan from Japan's top three banks-MUFG, SMBC, and Mizuho Bank-marking a rare transaction for a government-owned company in yen. Hudco priced the five-year loan at 70 basis points above Japan's TONAR and will swap it to dollars and hedge it, reducing the cost to under 7%, which is lower than domestic rates. Taiwanese and Singaporean banks are keen on syndicating the loan, attracted by the low-risk nature of the sovereign-backed deal. This transaction reflects growing global confidence in Indian enterprises and enhances Hudco's capacity to finance domestic housing projects.
The Housing and Urban Development Corporation (Hudco) has raised 60 billion yen (around USD 448 million) through a loan from three of Japan's largest banks, marking a rare transaction for a government-owned company in yen. Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Bank, three leading Japanese financial institutions, have collaborated to extend this loan to Hudco, according to individuals with knowledge of the matter.
Hudco, which is responsible for constructing mass housing projects in major cities and financing large-scale infrastructure developments, plans to use the funds for its domestic lending operations. It priced the 5-year loan at 70 basis points above the Tokyo Overnight Average Rate (TONAR), Japan's interbank benchmark rate, currently around 0.25%. After converting the funds to U.S. dollars and hedging, Hudco will secure the loan at a cost of less than 7%, which is notably more competitive than similar loans available in the domestic market.
This international loan provides Hudco with a strategic financial advantage. After hedging, the cost of the loan will amount to about 130 basis points above the 3-month Secured Overnight Financing Rate (SOFR), still below 7%. This cost efficiency allows Hudco to access foreign capital at a lower rate than it could secure domestically, making it a beneficial deal for the company's operations.
Although Hudco did not respond to enquiries for comment, it is syndicating the loan to other banks, with financial institutions from Taiwan and Singapore competing for a share. According to sources, Taiwanese banks are particularly interested in this transaction, viewing it as a low-risk, sovereign-backed deal that aligns with their strategy of diversifying their portfolios with Indian credit. Taiwanese banks typically work with smaller profit margins, and the low-risk nature of this transaction makes it an attractive opportunity for them.
This financing arrangement reflects the growing interest of global financial institutions in partnering with Indian government-owned enterprises. The collaboration with leading Japanese banks signals confidence in India's economic landscape and sets a positive precedent for future engagements between Indian public sector entities and international lenders. Through this strategic loan, Hudco will be able to continue its mission of developing affordable housing and financing infrastructure projects across India while capitalising on more favourable foreign lending terms.
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