DIAL raises $522 mn via 10-year bonds

DIAL's bond issuance opened and closed on Thursday and bears a coupon of 6.125%

Delhi International Airport Private Ltd (DIAL), a subsidiary of GMR Airports Ltd and GMR Infrastructure Ltd, raised $522.6 million by selling 10-year bonds in the international market. The money will be used to refinance its domestic rupee loans and external commercial borrowings (ECBs).

Usually, Indian companies raise money in the five to seven years’ bucket as appetite for the 10-year segment for speculative grade is quite limited in the international market.

In October 2014, Tata Motors had raised $250 million through 10-year bonds. Tata Motors was rated BB by Standard & Poor's. The bonds, which are rated BB in the international market, fall in the speculative-grade category. DIAL’s rating in the domestic market, however, is AA. The reason for the poor rating in the foreign market of Indian firms is that the country’s sovereign rating itself is closer to speculative grade.

DIAL’s bond issuance opened and closed on Thursday and had an annual coupon rate of 6.125 per cent. Bonds have been listed on the Singapore Stock Exchange.

According to bankers, the bonds witnessed a strong investors interest with $3.5 billion worth of subscription against the issue size of $500 million. The bonds have a ‘bullet’ clause that ensures outgo in terms of principal will happen only after nine years.

The huge demand for the bonds helped bankers tighten yield down by 37.5 basis points from the initial guidance, according to sources.

RBI norms say to refinance rupee loans through external borrowings, a company should issue bonds with a maturity of at least 10 years. So, the huge demand for DIAL’s 10-year bond issuance was a favourable development for Indian firms, say bankers involved in the deal.

“The bond issuance opens a window of opportunity for mid-tier companies, including those operating infrastructure projects. The issuers are getting an alternative source of efficient capital and offshore investors are happy to get such good yields, given near-zero yields in those markets,” said Ganapathy G R, co-head of debt syndication & origination, Deutsche Bank India.

According to a statement by GMR Group, demand came from investors in Asia, Europe and the US.

Citi Group and Standard Chartered Bank acted as the joint global coordinators while Citi Group, Standard Chartered Bank, Axis Bank, HSBC Bank, Deutsche Bank, Goldman Sachs, JP Morgan and Mitsubishi UFJ Financial Group were the joint book runners for the issue.