UltraTech, ReNew see overwhelming response for offshore fundraising

UltraTech, ReNew see overwhelming response for offshore fundraising

MUMBAI: Aberdeen, AIA – a global insurance giant and PIMCO are among global investors that may have bought Cement maker UltraTech’s maiden dollar bonds, which were priced at 167.5 basis points above the US Treasury.

The bond sale by any Indian cement company evinced strong interest with bids over seven times the offer of $400 million until the time of writing this article. The number of bids dropped to four times after the bonds finally at least 42 basis points higher than than the initial price guidance.

Bonds are available for international investors including the US.

Goldman Sachs, Bluebay and Citadel are likely among other investors subscribing to those 10-year papers, said market sources. A basis point is 0.01 percent.

Individual investors could not be contacted immediately for comments.

The proposed bond sale assumed significance as these bonds are marked as ‘sustainable’ or ESG (Environmental, Social and Governance) in market parlance raised by a cement company that emits carbon pollutants at the time of manufacturing.

The issuer has incorporated a clause of interest step-up in the investor terms. If the company fails to achieve the target for environmental sustainability during the next nine years, an additional 25 basis points will be added to the coupon after that and be paid to investors.

Like its other peers, UltraTech too faces high environmental risk as a cement producer “due to costs associated with air and carbon regulation compliance.” Such risk is said to be mitigated by UltraTech’s commitment to environmental management through various initiatives.

JP Morgan and HSBC are helping the company to raise the money.

The proceeds from the issuance will be used to refinance existing rupee debt with the remainder reserved for regular ongoing capital expenditure requirements and general corporate purposes.

“By repaying local bank loans it will create space for more local loans. The company is seeking to expand in coming quarters with the economy showing signs of recovery,” said a senior executive involved in the fund-raising exercise.

Moody’s Investors Service graded the bonds with Baa3, the lowest rank in the investment grade category but with negative outlook.

“The negative outlook reflects the fact that UltraTech’s operations are closely tied to India’s economy, and thus its outlook mirrors that of the sovereign,” Moody’s said in a report.

UltraTech maintains conservative financial policies and has historically funded its acquisitions with a mix of debt and equity, it said. Environmental considerations are material to today’s rating action.

At the same time, India Green Power, an overseas arm of ReNew Power received bids worth about $1.6 billion against its actual size of $460 billion. Those high-yield bonds are expected to yield around 4 percent at the close of the deal, a quarter percentage point tighter than initial guidance.

EastSpring, Primus, China Life Franklin Asset Management are said to be investors among others showing interest own those bonds.

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