India Bond House: ICICI Bank

IFR Asia Awards 2020
3 min read
Krishna Merchant

Delivering liquidity

ICICI Bank stood out in 2020 for its efforts to channel capital markets funding to Covid-hit companies across the rating spectrum.

It brought first-time issuers to the rupee bond market and reopened the hybrid market for capital-starved state-owned banks, harnessing excess liquidity and low yields to support the real economy.

On March 27, shortly after India went into lockdown, the Reserve Bank of India announced a targeted long-term repo operation to ease corporate funding costs by allowing banks to borrow up to three-year funds at a floating rate linked to the policy repo rate to deploy in investment-grade paper.

While many of its peers were reluctant to look beyond top AAA rated names, ICICI Bank deployed 62% of the TLTRO funds in paper with a lower rating. As sole arranger, it helped Ashok Leyland, Apollo Tyres, HPCL-Mittal Energy and India Grid Trust raise a total of Rs23bn from the primary bond market, and helped create secondary liquidity by purchasing bonds of AA and AA– rated issuers such as Tata Power, Tata Motors, Torrent Power and Century Textiles.

The arranger played a crucial role in reopening the perpetual market for capital-starved state-owned banks. The instruments had been out of favour since Yes Bank’s Additional Tier 1 securities were written down in March, but ICICI helped Bank of Baroda raise Rs7.64bn of AT1 capital at 8.25%, bringing back investor appetite for the quasi-equity instrument.

ICICI Bank was also a lead adviser on HDFC Life Insurance’s debut issuance of 10-year subordinated bonds at a 6.67% yield, paving the way for more insurance companies to tap the market.

The bank enabled listed infrastructure trusts lock in over Rs20bn of low-cost fixed-rate funding. It was sole arranger on a Rs4bn 3.5-year issue that allowed India Grid Trust InvIT to refinance existing debt and add to its power transmission portfolio, and joint arranger on IndInfravit Trust’s Rs16.75bn bonds backed by cashflows from its road projects.

It also brought Inox Wind and Inox Wind Infra to the market for the first time, printing nearly Rs4bn after enhancing the rating from BBB+ to AA with a corporate guarantee from Gujarat Fluorochemicals.

ICICI helped JSW Steel sell Rs40bn of seven-year bonds in August last year at an attractive yield of 8.50%, helped by tight covenants such as a coupon step-up and early redemption if the rating is downgraded. Separately, it helped auto supplier Motherson Sumi Systems lock in Rs30bn from three-year bonds at a low yield of 6.65% to refinance offshore debt.

ICICI finished IFR’s review period as number two on the domestic league tables with a 13.5% market share, recording deals worth Rs690bn.

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