Yes Bank did more than its peers to bring new and lower-rated borrowers to the Indian bond market in 2013, keeping up efforts to deepen the country’s capital markets even amid extreme volatility.
In a market that top-rated public-sector issuers dominated, Yes Bank added diversity, with Rs74.6bn (US$1.2bn) of the Rs143bn of bonds it underwrote during IFR’s review period carrying ratings below Triple A.
Amid a selloff in emerging-market currencies that hit India’s bond markets hard, sending 10-year government yields soaring as much as 199bp from June to August, Yes Bank was there for its clients.
Yes Bank’s roster of debut issuers included a Rs1.6bn zero coupon five-year non-call three bond for satellite TV company Tata Sky in December 2012. The A rated bond was priced to yield 11.60%, setting a zero-coupon template replicated in mid-October for AA+ rated Tata Global Beverages. The Rs3.25bn three-year bond was priced to yield 9.75% with Yes Bank as a joint arranger.
Among other key deals were a partly paid bond in May for AA+ rated L&T Seawoods and a Rs1.75bn debut paper for AA rated textile group Raymond.
Yes Bank also showed it could compete when it came to India’s top-tier names, winning a sole arranger mandate on a Rs20bn 10-year secured bond for Triple A rated Reliance Utilities & Power in April. That bond, paying a coupon of 8.95%, was 2x covered from a variety of investors.
It also showed its support for India’s corporate issuers even when other underwriters closed books in the middle of the summer selloff. Indian banks are among the biggest investors in rupee bonds and are required to hard underwrite new issues before lining up investors, leading to losses on bond portfolios of around Rs300bn in the July-September quarter.
Yes Bank was not alone in taking a hit, and recovered Rs1.1bn of losses before the end of September, but it stood out in bringing groundbreaking deals to market amid difficult conditions.
In July, Yes Bank was the sole underwriter of a landmark 50-year bond for vehicle and tractor maker Mahindra & Mahindra. Until then, the longest-duration issues in the market were 30-year government bonds. Even though policy measures to support the rupee dragged the bond quickly below par, the bank is confident of distributing the risk in the coming months and has built in the protection of an investor put if M&M’s rating falls below A or if there is any change in the company’s management, even if its name is changed.
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