ICICI Bank has raised $1 billion through a five-year dollar bond, completing the largest overseas debt issuance by an Indian private-sector lender in nearly 14 years, according to bankers familiar with the transaction.
The bank priced the bond at a coupon of 100 basis points above US Treasury yields, significantly tighter than the initial guidance of 130 basis points. The final coupon works out to 5.46%, reflecting strong investor demand for the offering.
Investor appetite exceeded expectations, with the issue attracting about $3 billion in orders against an initial base size of $500 million, enabling the lender to double the size of the transaction. The bankers disclosed the details on condition of anonymity because they were not authorised to speak publicly.
ICICI Bank did not immediately respond to a request for comment.
The transaction is the largest dollar bond sale by an Indian private-sector lender in nearly 14 years and the second-largest by any Indian bank since State Bank of India’s $1.25 billion five-year issuance in January 2013.
The fundraising comes after the Reserve Bank of India introduced a lower-cost hedging facility last month, allowing eligible external commercial borrowings by banks and state-owned companies to be hedged at a fixed annual rate of 1.5%, compounded semi-annually.
The measure has significantly reduced hedging costs, making overseas dollar fundraising more attractive for Indian financial institutions.
Research firm CreditSights had projected the bond would be priced at a spread of between 95 and 100 basis points over US Treasuries but estimated its fair value at around 85 basis points.
CreditSights analysts Lim Ze Hao and Pramod Shenoi said ICICI Bank’s bonds were broadly valued in line with HDFC Bank’s outstanding debt and about 10 basis points tighter than State Bank of India’s four-year dollar bonds after accounting for the duration premium.
The deal follows similar overseas fundraising by other Indian lenders. HDFC Bank raised $750 million through a five-year dollar bond in June at a spread of 92 basis points over US Treasuries, while Axis Bank secured $800 million through a dual-tranche dollar bond offering during the same month.
ICICI Bank said proceeds from the bond sale will be used for general corporate purposes. The bonds are expected to receive investment-grade ratings of Baa3 from Moody’s and BBB from S&P Global, in line with the bank’s issuer ratings.
The lender last accessed the international debt market in December 2017, when it raised $500 million through a 10-year bond carrying a 3.80% coupon.
Following the issuance, CreditSights upgraded its recommendation on ICICI Bank’s bonds to “outperform” from “market perform,” citing attractive valuations and favourable pricing.
By Goodness Anunobi
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