IDFC Bank added depth and breadth to the Indian bond markets in 2015, leading the key trend of bringing infrastructure companies to the rupee capital markets to repay high-cost bank debt.
The first bonds under an Asian Development Bank-backed credit enhancement scheme, the first road annuity project bonds and the first corporate green bonds in the domestic market were significant landmarks.
IDFC was far from the biggest arranger in a market where the line between underwriters and investors is often blurred, but it stood out to deliver solutions to borrowers across a range of industries.
The lender arranged cost-effective financings for a range of infrastructure clients as it transformed from a non-banking financial company into a full-fledged universal bank. At times, IDFC’s restructuring limited its access to money-market funding and it ended IFR’s review period with a modest 3.5% share of the rupee bond market.
However, IDFC prioritised its resources for unique transactions to overcome any transition troubles and did not shy away from underwriting deals to ensure quick turnarounds.
IDFC was the sole underwriter on the Rs4.51bn (US$68m) credit-wrapped bonds for Renew Wind Energy (Jath) in September. The deal was the first to use partial credit enhancement from the Indian Infrastructure Finance Co and the ADB, introducing a novel way of bridging the gap between infrastructure owners and institutional investors.
The long door-to-door tenor of around 18 years, with a put/call option after around 11 years and semi-annual amortisation, made it difficult to place the bonds with investors, even though the credit wrap had bumped up the rating to AA+(SO). IDFC was the first financier to get comfortable with the structure and quickly sold over a quarter of the paper to third-party investors.
The bank was also instrumental in structuring the first partially credit-enhanced bonds for Jhajjar Power, a CLP India group company, which allowed the sponsor to replace high-interest rupee loans obtained before the plant began operations.
In September, IDFC also brought to the market CLP Wind Farm’s Rs6bn green bonds, the first from India’s corporate sector.
IDFC solely arranged L&T Interstate Road Corridor’s Rs4.09bn nine-year bonds in February after successfully bringing to market the Rs2.42bn bonds related to the Gwalior Bypass Project for Era Infrastructure Group, the first notes backed against a road annuity from National Highways Authority of India.
IDFC was also a co-arranger on the jumbo Rs50bn bonds and warrants combo offering of HDFC in October.
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