* Indian lender gets US$3.5bn in orders for US$500m bond
* Deal shows investors are again buying India
* Slower loan growth, however, curbs dollar needs of banks
By Neha d'Silva
HONG KONG, Nov 22 (IFR) - ICICI Bank completed a successful
US$750m bond offering last Monday that proved international
investors were no longer shunning securities from India as they
did just two months ago.
Still, no one expects a rash of deals to follow as lagging
credit growth in India is curbing the funding requirements of
Investors froze out Indian borrowers in the summer of 2013
after the US Federal Reserve signalled it might scale back its
massive monetary stimulus. The news triggered a free fall in the
rupee and widened credit spreads.
The backdrop for Indian credits brightened after data in
late September showed the country's current account deficit grew
less than expected in the third quarter, and the US Federal
Reserve indicated it was not ready to reduce monetary stimulus
just yet. The rupee stabilised and Indian credits began to
return to the primary market.
Indian banks are the country's biggest issuers of dollar
debt and they tend to jump on every opportunity to get better
funding in overseas markets.
Yet, ICICI became just the third bank to come to the US
dollar markets since early October.
Canara Bank was the first with a US$500m five-year Reg S
deal in early October, but it had to offer investors 20bp in
yield concession to secondary levels of its bonds in order to
Canara's offering was followed by one from HDFC Bank, which
issued a US$500m three-year Reg S bond. HDFC managed to price
the deal tight to its own curve, thanks to demand at the time
for short-duration bonds.
ICICI was the most successful so far. The US$750m 144A/Reg S
5.5-year bond was priced without a concession to secondary
levels of the lender's outstanding paper.
The offering also received hefty orders of US$3.5bn from 284
accounts. US investors showed strong interest, buying 36% of the
bonds, European investors bought 30% and Asian investors bought
"Western accounts were big sellers of EM credits when the
summer selloff happened, they are now strong buyers of these
credits," said a Singapore-based banker.
ICICI's success, though, is not expected to start a rush of
"It's not like before when the success of one deal would be
followed by others," said another Singapore debt banker. "Credit
growth is slowing and Indian banks' requirements for funds are
Another Singapore DCM banker agreed: "Market access is
clearly not an issue for Indian banks any more, but the issue is
there is no growth on the demand side and there is a slowdown on
the corporate borrowing side."
SLOWER LENDING GROWTH
Indeed, credit growth in India dropped to its slowest pace
since December 2009 in June amid tighter liquidity onshore and
tougher borrowing conditions for banks earlier this year.
At the end of the second quarter, loan growth in India
dropped to 13.4%, according to data from Thomson Reuters.
That compares to loan growth of 18.3% for the same period in
2012 and 21% in 2011.
India's June quarterly GDP growth rate was also the slowest
in four years, the latest data showed. Economic growth virtually
halved in two years to 5% in the fiscal year to end-March - the
lowest in a decade.
As banks lend less, they do not have an urgent need to
borrow abroad, even if investor appetite is back.