(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

MUMBAI  - Unwieldy syndicates are rarely symptoms of capital market health. India’s $42 billion Housing Development Finance Corporation, the country’s top private mortgage lender, has hired 19 banks to help it raise $1.9 billion, Refinitiv publication IFR reports: “the largest ever grouping in India’s capital market.” The clamour to be on such a thinly spread mandate reflects a fear that fee opportunities might run dry.

Issuers tend to hire large crowds of managers when deals are exceptionally large or complex. Reliance Industries, for example, hired a big group for a record $7 billion follow-on in June. But HDFC’s deal is smaller and simpler. Tapping banks including Goldman Sachs and Morgan Stanley, the plan is to issue a mixture of equity, debentures, shares and warrants.

When it comes to initial public offerings, too many banks can lead to serious flops, as when Chinese pork producer WH Group picked 29 banks for its 2014 Hong Kong IPO. By contrast, HDFC is a well-established and well-capitalised decades-old business that has financed over 7.7 million homes. And the Indian lender is a top attraction as investors flee to quality.

Although over one-quarter of HDFC’s $68 billion loans outstanding aren’t paying interest due to a central bank-endorsed moratorium, the lender’s tier 1 capital adequacy ratio of almost 16.5% is well in excess of the regulatory requirement. The new funds will help plug potential balance sheet holes and finance growth, including at unit HDFC Bank, and subsidiaries HDFC Life and HDFC Mutual Fund.

Over $22 billion have been raised in India’s equity capital market this year, more than the whole of last year, according to Dealogic. But the crowd of managers willing to accept tiny tranches of a presumably small fee pool suggests they see the window to earn league table credits closing.

India’s virus case count has crossed one million, behind only the United States and Brazil. Monetary easing in rich countries fuelled a surge in foreign portfolio inflows in June, but the fear is funds will become pickier, especially about emerging markets. The sight of banks scrambling suggests the good times won’t last.

 

CONTEXT NEWS

- Housing Development Finance Corporation has hired around 19 banks to manage a capital raising of up to 140 billion rupees ($1.87 billion), Refinitiv publication IFR reported on July 16, calling it “the largest ever syndicate in India's equity capital market”. The Indian lender will raise capital through the issuance of shares, convertible debentures, non-convertible debenture-cum-warrants or foreign currency convertible bonds.

- Axis, Bank of America, BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs, HSBC, ICICI Securities, JM Financial, Kotak, Morgan Stanley, Motilal Oswal and SBI Capital are among the banks participating, according to the report.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Pete Sweeney and Sharon Lam) ((una.galani@thomsonreuters.com; Reuters Messaging: una.galani.thomsonreuters.com@reuters.net))