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Indian Sing dollar bonds to follow IDBI success

21 Aug 2012

IDBI’s Singapore dollar bond issue is likely to spur more deals from Indian lenders and corporations amid a flurry of issuance by Indian banks.

The Industrial Development Bank of India (IDBI) has successfully tapped the Singapore dollar bond market and more foreign currency deals from well known Indian banks and corporates will likely follow, as the Indian summer for bonds continues, according to experts.

The deal priced yesterday (August 21) at 3.65%, well below the initial guidance price of 4%. Bookrunners on the deal were DBS, HSBC and Standard Chartered.

It was capped at SGD250 million (US$199.9 million) though Clifford Lee, head of fixed income at DBS, believes the bank could have raised much more as the books exceeded SGD3 billion from over 80 accounts.

“The Singapore market is a very familiar name driven market and IDBI is rated at the sovereign ceiling. It is majority owned by the government so it has all of the right ingredients, it could easily have priced a much bigger deal,” he said.

The Singapore dollar offers an attractive price point for Indian borrowers over US dollar funding.

“They would have to look at the Singapore market vis-a-vis the dollar market, and I’d say that the pricing would be very competitive compared to the dollar side. It was at par but now is more likely better by five or 10 basis points,” said Lee.

ICICI Bank has issued a number of Singapore dollar deals through private placements, but IDBI is the first Indian bank to do a public deal in the market. Experts believe that its success will encourage other Indian banks and corporations to come to market.

“I wouldn’t be surprised if everybody calls every Indian bank under the sun now, if they haven’t already been doing so. So I wouldn’t be surprised to see others following suit. There’s a lot of money to be put to work and people are looking for a bit of extra yield and these are the names that are paying that, so it ticks a lot of boxes,” said a banker on the deal.

A syndicate banker close to the deal agrees: “We don’t have anything lined up for tomorrow, but my colleagues on the origination side will be putting the calls into the banks, in the main, as they can move a bit quicker because they have the documents set up. For corporates it can be a bit more of an internal decision making process so will take a bit longer.”

In order for a corporation to be successful in the Singapore dollar market, the banker believes the main two criteria are a recognisable name and a willingness to pay a reasonable yield.

“As long as the credit quality is reasonably good and they’re paying the appropriate spread I see no reason why wouldn’t see further issuance. Being state-backed helps but it’s not absolutely required. Every credit has a price, and the private banks are always looking for yield so if it’s a well recognised name things could go quite well,” he said.

IDBI has been active in terms of diversifying sources of funding. On November 11 last year, it issued a three-year renminbi-denominated bond worth Rmb650 million (US$102 million) with a 4.6% coupon. On March 16 the bank issued a Swiss franc denominated bond worth CHF110 million (US$119 million) with a 3.0% coupon, according to Dealogic.

The Singapore dollar market is becoming more attractive to Asian borrowers. Malaysian banks, Chinese property developers, Russian Banks and now Indian banks have all tapped the market recently, and year-to-date the volume of bond deals in Singapore dollars has already exceeded the figure for full-year 2011. US$15.14 billion worth of SGD deals were carried out in 2011, versus US$17.28 billion so far this year, according to Dealogic data.

According to DCM bankers the recent bout of international deals from Indian banks is due to the need to lend to Indian corporations abroad for acquisition financing.

“It was a very uncertain market over the last year for emerging market debt and the spreads and the yields were much higher. They have come down significantly over the last couple of months. These deals needed to be done for a while and now is a good window,” said one DCM banker away from the deal.

Private Banks took the majority of the deal IDBI, with 65%. Asset managers bought 17% of the bonds, and 18% went to banks. Most of the investor interest (78%) came from Singapore with 22% of the deal going elsewhere.

21 Aug 2012