Power financier REC Ltd has successfully raised $500 million by selling a five-year bond to global investors in a transaction that concluded on Monday. The bonds were priced at a premium of 127 basis points over the five-year US Treasury, which was trading at a rate of 3.51% on the same day, according to sources familiar with the matter. To clarify, one basis point equates to 0.01 percentage point.
The bond’s final yield of 4.78% for a five-year term indicates that it was one of the most competitively priced instruments available in the market, potentially paving the way for more Indian corporations to explore opportunities in the bond market. A participant involved in the transaction remarked that this pricing could attract additional Indian companies looking to raise funds through similar avenues.
In addition, it has been reported that Shriram Finance, a private sector non-banking financial company (NBFC), is preparing to raise at least $500 million through a bond issuance with a term of 3.5 to five years, expected to be priced as early as Tuesday.
In a recent announcement to stock exchanges, REC Ltd disclosed that it had appointed several leading financial institutions—including Barclays, BNP Paribas, Citigroup, DBS Bank Ltd, Deutsche Bank, Emirates NBD, HSBC, J.P. Morgan, MUFG, SMBC, and Standard Chartered Bank—as managers for a fixed income investor conference call scheduled for September 23, 2024.
Sources indicate that a number of Indian companies are poised to enter the market following the recent interest rate cut by the United States, which has subsequently narrowed the yield spread between Indian and US dollar securities. It is anticipated that banks and NBFCs from India will initiate these issuances, followed by companies in the industrial and pharmaceutical sectors.
When compared to previous bond issuances, the REC bond was priced significantly tighter than the 5.62% yield it commanded when the company raised $750 million in a five-year bond sale back in April of the previous year. The latest issue attracted over $1.5 billion in bids, allowing REC to revise its pricing down from the initial guidance of 160 basis points above the five-year US Treasury.
Notably, HSBC, MUFG, and Mizuho Bank were involved as part of the banking team for this transaction. While the company has not yet responded to requests for comments, the successful bond sale highlights the growing interest in Indian corporate bonds among international investors.
