India 2007: ICICI Bank diversifies funding base

IFR India Special Report 2007
4 min read
Emerging Markets

With three hugely successful bond deals under its belt so far this year, each one in a different currency, ICICI Bank has firmly established its presence in the international capital markets and, providing the markets remain favourable, is likely to have little problem tapping foreign funding going forward.

ICICI Bank targeted several currencies through its financings this year in order to diversify its investor base and access different. “We have definitely been successful at that, as we have had tremendous feedback from a varied investor base,” said Sudhir Dole, senior general manager/global head of the international financial institutions group and head of transaction banking at ICICI in Mumbai.

Today, ICICI Bank is India’s largest overseas borrower and, as Dole puts it, has become a showcase for India. The foreign investor community holds the ICICI name in high regard and the bank also benefits from the huge amount of interest global investors have in India at the moment. The Indian economic story is very strong and ICICI has been representing that story in overseas markets.

The bank kicked off the year with the largest bond deal in Asia (ex-Japan) in the form of a jumbo US$2bn three-tranche 144A issue – the first three-tranche offering from an Indian bank. The deal comprised a cumulative subordinated notes offering of US$750m, qualifying as Upper Tier II capital, and dual-tranche senior notes consisting of a three-year and a five-year US$500m notes offering. The deal also included a US$750m five-year fixed-rate tranche. The deal was heavily oversubscribed with an order book of US$8bn.

Then, a €500m bond deal, the first Euro-denominated public transaction done by an Indian entity, which ICICI issued in March was three times oversubscribed. And ICICI also issued India’s first sterling-denominated bond, a £350m three-year deal, which was a big hit with investors, too. Separately, ICICI UK (the bank’s UK subsidiary) issued two US$500m bond deals.

And the bank has not completed this year’s funding plans yet for it has mandated 10 international banks to arrange a US$1.5bn three-tranche syndicated loan. This will be India’s largest-ever offshore syndicated loan from a financial institution.

ICICI Bank is very much part of a trend in which Indian banks have been trailblazers in the capital markets in recent years. In July 2004, for instance, Exim Bank issued a hugely successful US$250m five-year Reg S bond with a 5.375% coupon (its first international bond deal). Beyond helping the bank meet its funding needs, it also paved the way for other Indian issuers by changing sentiments towards them in the Reg S market. Then in February 2006, Exim Bank borrowed in the yen market – an area no Indian entity had ventured into since 1991 – and issued a ¥23bn five-year Samurai Bond.

Last year, ICICI became the first issuer to sell hybrid Tier 1 debt internationally, cashing in on the Indian Government’s easing of regulations of what constitutes Tier 1 capital. The US$340m non-call 10 perpetual deal, which Morgan Stanley, JP Morgan and Merrill Lynch led, was a hugely popular sell. But even if Indian banks have a good borrowing future, Dole would still like to see more changes happen within India, so that India borrowers have more fund raising options in different markets.

As India continues integrating with the world economy, Dole hopes that access to new products and markets will assist in further diversifying the investor base.

“We want to diversify our long-term funding options and there is little doubt that the international markets are very deep,” he said.

Overall, though, the Indian scenario is positive, and changes are certainly happening. Gradually, more and more issuers, including Indian corporates, should be able to access international markets. “It’s been a positive story overall, except for the current situation, where spreads across the board have widened,” Dole said. “This is only a temporary setback.”

With total assets of US$79bn at the end of March, ICICI is India’s second-largest bank, and is ranked third among all the companies listed on the Indian stock exchanges in terms of free float market capitalization. The bank has about 950 branches and 3,300 ATMs in India and it has a presence in 17 countries.

Savita Iyer