COUNTRY REPORT INDIAINDIA
DEBT CAPITAL MARKETS
› REC SCRAPS BOND ISSUE
RURAL ELECTRIFICATION CORP has withdrawn
a three-year 13-day bond offering on
September 12 after it received bids at a
higher than expected level, according to
market sources.
Most bids were concentrated around the
9% level, while the issuer was expecting
8.45%.
The Indian public sector company was
targeting Rs5bn (US$69m) from the bond,
plus a greenshoe option of Rs25bn.
India’s corporate bond yields have moved
up sharply because of the emerging market
sell-off, a weakening rupee and tightening
liquidity.
The three-year AAA rated corporate bond
yield has surged to 8.80% as of Thursday
last week, up 30bp in the past five trading
sessions, according to Thomson Reuters data.
REC is yet to make an official
announcement on the issue’s withdrawal.
› ABF PRINTS ZERO-COUPON BONDS
ADITYA BIRLA FASHION & RETAIL has raised Rs3bn
from zero-coupon bonds maturing on
August 14 2021, according to a filing on
National Securities Depository Limited.
The effective yield will step up by 25bp if
the rating is downgraded to A+ from AA–.
Crisil and India Ratings have assigned AA
ratings to the notes.
ICICI Bank is the sole arranger for the deal.
› BHOPAL EYES 10-YEAR MUNIS
BHOPAL MUNICIPAL CORPORATION is eyeing 10-year
bonds with a seven-year put/call option,
according to a source close to the plans. The
corporation met arrangers on September 12.
If the deal proceeds, this will be the fifth
municipal bond offering since the city of
Pune opened the market last year.
Bhopal is planning to raise Rs1bn, plus
a greenshoe option of Rs750m. The actual
structure of the deal is not yet known.
Last month, Greater Hyderabad
Municipal Corporation raised Rs1.95bn
from a second tranche of 10-year bonds
at 9.38%, payable semi-annually. In June,
Indore raised Rs1.399bm from 10-year
bonds at 9.24%.
In June last year, Pune raised Rs2bn from
10-year bonds at 7.59%.
Bhopal is yet to make an official
announcement.
› JUBILANT PRINTS RS3.5BN BONDSJUBILANT LIFE SCIENCES has raised Rs3.5bn from
a triple-tranche bond offering, according to
a BSE filing.
The Indian pharmaceutical company
raised Rs1bn each from two and three-
year tranches in a separately transferable
redeemable principal part (STRPP) format
at 8.95% and 9.1% respectively. It also raised
Rs1.5bn from four-year bonds in the same
format at 9.26%.
Interest will be paid semi-annually.Yes Bank is the sole arranger for the deal.
Crisil and India Ratings have assigned a
AA (stable) rating to the secured notes.SYNDICATED LOANS
› TATA POWER MANDATES FIVE FOR REFITata Power has mandated five banks on a
US$245m three-year refinancing.
The five mandated lead arrangers and
bookrunners are ANZ, Bank of America MerrillIndian retail bonds sail through
Bonds ICCL retail issue twice subscribed on first day of offeringRetail bond issues are sailing through India’s
onshore market despite rate volatility as
investors are drawn to the higher yields on
public issues from non-banking financial
companies, even as state-owned issuers
are being forced to scrap institutional
placements.
INDIABULLS COMMERCIAL CREDIT LIMITED has
already received subscriptions of Rs26.7bn
(US$357m) for its debut issue of retail bonds
that opened on September 11 and aims to
raise a minimum of Rs10bn. The NBFC, which
focuses on long-term mortgage-backed
loans, saw subscriptions of two times, or
Rs20bn, from qualified institutional buyers
within the first five minutes of the issue
opening on Monday.
TATA CAPITAL FINANCIAL SERVICES has received
subscriptions totalling Rs15.6bn and is
targeting a base size of Rs20bn, the first
public issue by a Tata Group company in a
decade. The issue opened on September 10
and aims to raise up to Rs75bn.
The offerings from ICCL and Tata Capital
close on September 28 and 21, respectively.
In the institutional private placement
format, however, RURAL ELECTRIFICATION CORP
had to withdraw its planned sale of Rs30bn
three-year 13-day bonds on Wednesday last
week after it received bids at a higher than
expected yield.
And on September 4, Power Finance Corp
scrapped a sale of 10-year bonds to raise
up to Rs20bn after it failed to achieve the
desired price.
Retail investors are subscribing to public
issues from good credits for a yield pick-up
as they are getting more than 9% yield for
the 10-year maturity, said Ajay Manglunia,
head of fixed income at Edelweiss Financial
Services.
The NBFCs’ lending books are seeing
double-digit growth as state-owned banks
have slowed lending due to asset qualityissues and capital constraints. Public issues
have gathered steam in India after the
country’s market regulator fast-tracked the
issuance process, cutting the listing process
from 12 to six working days in a rule change
announced in August.
NBFCs are tapping the retail route at fixed
yields to diversify and provide capital for their
growing balance sheets.
“Over the last two to three years, we have
grown at a compounded annual growth rate
of 15%,” said Sandip Joshi, assistant vice
president of Tata Capital. “On an asset size
of Rs369bn, we are raising Rs75bn from the
public route, which is justifiable.”
Tata Capital has the ability to pass on
higher fundraising costs to its borrowers.
It has a balance of fixed and floating rate
assets, which helps with managing net
interest margins.
“Although there has been volatility in
interest rates, we are looking at the raising of
retail bonds as a further diversification of our
resource-raising profile,” said Joshi. “When
the rates move up or down, the transmission
mechanism to the customers is critical.”
Tata Capital continues to focus on growing
its balance sheet. It has borrowed 20%-21%
from commercial paper, 50%-60% from
bonds and balance from bank loans in FY18.
“The negative carry on the portfolio for
investors reduces. The instrument gets listed
and the exchange of paper happens in the
secondary markets in a short span of time
which is positive for investors,” said Joshi.
So far, there have been public issues of
Rs200bn to Rs220bn, and the last four to five
public issues were oversubscribed, according
to Tata Capital.
ICCL, which has Rs82.63bn assets under
management and a gross bad loan ratio of
0.4% as of March 2018, is targeting up to
Rs20bn from retail bonds.
KRISHNA MERCHANT