Indiabulls' bond sale will test investor confidence in shadow banks

Indiabulls Housing is seeking to raise as much as 10 billion rupees through the sale of notes that open for subscription on Monday

Indiabulls Housing Finance Ltd., one of India’s largest mortgage lenders, is seeking to raise funds in the local public bond market after an absence of three years by the group, in a deal that will test investor confidence in the nation’s non-bank financiers.

  

Indiabulls Housing is seeking to raise as much as 10 billion rupees ($137 million) through the sale of notes that open for subscription on Monday. Yields on the company’s local-currency bonds surged to more than 40% in 2019, stock exchange data show, as investors soured on debt of the company and other Indian shadow lenders following the surprise collapse of a major non-bank financier.           

Indiabulls Housing’s return would come as issuance by shadow lenders remains its lowest so far this year since the nation’s credit crisis that began in 2018, after a second-wave of the Covid-19 pandemic slowed debt sales this year. Still, the lender is now benefiting from a resurgence in demand for home purchases amid a recovery in the economy following earlier rate cuts by the Reserve Bank of India to fight the pandemic impact.   

Rupee bonds of Indiabulls Housing, whose funding has been in the spotlight, have rallied, and yields on its debt securities due in 2023 were recently indicated at about 9.35%. India shadow lenders have sold 1.3 trillion rupees of local-currency notes so far this year, the lowest for such a period in three years, Bloomberg-compiled data show.

Crisil Ratings upgraded the outlook for Indiabulls Housing’s AA rating this year to stable from negative, in a positive move for the financier which lost its AAA rating in 2019. The company sold dollar-denominated convertible notes earlier in 2021, and has also priced rupee debt in private placements. 

Indiabulls Housing has been able to navigate successfully a period of turmoil for non-bank financial companies, and is back on a growth path, said Gagan Banga, managing director at the company in a virtual press briefing on Friday. We “hope to be a regular issuer in the public debt markets,” he said.