Muthoot Finance has re-tapped its May bond issue, raising an additional $100 million from offshore investors. This re-tap involves a 7.125% bond due in 2028, with a final price guidance of 6.73%.
Deutsche Bank and Standard Chartered were the arrangers for this issuance.
The initial bond, launched in May, raised $650 million, and showed strong global investor interest in India’s gold financing sector. These bonds, maturing in 3 years and 9 months, carried a coupon rate of 6.73%.
Proceeds from this issuance will be allocated towards on-lending and other activities permitted under the Reserve Bank of India’s External Commercial Borrowing Guidelines, a source said. The original issue was arranged by Deutsche Bank, Standard Chartered, and DBS Bank.
“The total ECB limit is $750 million, and they wanted to ensure that the bond trades well. The bond has indeed traded well, now trading up at 6.7% from 7.125%, so they are doing the tap at $101 instead of par, at a tighter price,” said a bank source.
The fundraise depends on the requirements. “In other cases, the bond may not trade up, the requirement might not be there, or the issuer has already met their financial needs for the year. It’s a very case-by-case situation, not a market trend. They have borrowed at 6.7%, and with hedging costs around 2.5% to 3%, it translates into 9.3%-9.5%,” the source added.
Many NBFCs are now tapping the market after a period of few issuances during the Fed’s hiking cycle. Since the Fed’s pivot in December, markets have reopened, and Indian issuers are evaluating opportunities in overseas markets, the source added.
From March 2022 to July 2023, the Federal Reserve raised interest rates by 525 basis points to tame runaway inflation, bringing policy rates to 5.25%-5.5% from nearly 0% during the pandemic. Although inflation in the US has decreased from its pandemic-era highs, more efforts are necessary to bring consumer prices down to the desired level.
