With corporate bond volumes rising by more than 50% in the rupee market, banks’ pricing and distribution skills were put to the test. For leading key trends, providing consistent solutions and supporting issuers with its balance sheet where necessary, Axis Bank is IFR Asia’s India Bond House of the Year.
The surge in corporate issuance was a key theme of the year in the Indian bond markets, and Axis Bank was clearly on top of the trend with a market share of 15%.
Pricing drove the boom in Indian corporate bonds, and Axis Bank consistently showed issuers that the bond market could offer them savings of at least 100bp over the loan market. The message hit home, and the bank finished the review period with 169 deals on its roster.
Axis Bank’s story is about far more than volumes – it is about quality, innovation and execution – but the huge number of deals the bank arranged meant it was always in the market and therefore had a superb market read.
Adani Ports and Special Economic Zone (APSEZ) is a perfect example of the bank’s market read and its ability to arrange complex transactions.
The issuer had a loan that was about to mature in December, and Axis Bank delivered it a 75bp saving by refinancing it through the bond market in a deal that attracted all sorts of investors. The smart part of the trade was that it was structured in a way that cash flows of three to 120 months were matched with similarly staggered redemptions.
APSEZ provides port services and has a 25-year agreement with refiner Indian Oil Corp to handle the crude oil needs of its Panipat Refinery. The APSEZ bonds were secured against the receivables of Triple A rated Indian Oil Corp, with additional securities provided. These bumped up the rating of the bonds two notches to AA+.
The 10-year bonds, which partially mature every quarter, pay a quarterly coupon of 10.50%.
Axis showed its ability to stand by its clients with hard underwrites with its support of AA+ rated Hindalco Industries in August. The bank solely led a Rs15bn 10-year bond at 9.60% for Hindalco, the flagship metals company of the Aditya Birla Group.
The bank chose not to participate in the company’s three earlier similarly sized deals as it found the pricing too tight. These transactions were done at 9.55%, at least 5bp–10bp tighter than the market at the time.
Underwriting is a crucial part of the Indian market, where companies demand the certainty of funding and pricing is sealed before distribution begins.
While this and many other deals showed the bank’s ability to underwrite transactions and sell them down, Axis Bank was willing to use its balance sheet to hold positions when the client needed it and if the price was right.
“In case of credit paper, typically rated AA or below, we tend to keep some hold position as this gives comfort to investors, who are taking positions in the said paper,” said Shashikant Rathi, head of DCM at Axis. “We also do market making in the secondary market in the said paper to provide the required liquidity.”
The bank also prized itself on its ability to offer quality advice. During the year, when investors’ appetite turned volatile on interest rates, Axis advised HDFC Bank and L&T Finance to come to market with only put and call structures, respectively, to suit their needs.
The bank also showed a good grasp of new products. It participated in Gujarat State Petroleum Corp’s Rs30bn bond issue, which was the first hybrid from a state-run entity. The deal had a 60-year tranche, as well as eight- and 10-year pieces.
Axis also introduced a number of first-time issuers, including Sterlite Industries, which issued a Rs5bn 10-year bond with a put/call option at the end of five years. The widely distributed bonds pay a coupon of 9.40%.
Many of the bonds that Axis brought to market during the review period were trading at premiums to their issue prices in secondary, reinforcing the bank’s reputation in the market.
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