ICICI Bank eyes $500 million dollar bond issue via GIFT City

ICICI Bank is close to raising at least $500 million through five-year dollar-denominated bonds as it looks to tap the Reserve Bank of India’s concessional dollar-rupee swap facility, sources familiar with the matter said. The bonds would be raised under SEC’s144A rules that allows companies to raise capital rapidly from Qualified Institutional Buyers (QIBs) in the US without full SEC registration.

The issuance, through the bank’s GIFT City IFSC unit, will mark ICICI Bank’s first US dollar bond sale in almost 10 years. The proceeds are expected to be used to provide leverage of up to nine times to clients, the sources said, adding that the bank is likely to announce the fundraising plan soon.

“The proceeds will primarily be used to support client financing requirements, with the concessional swap making the economics significantly more favourable,” a source said. “The bonds would tightly priced. It could be 90-95 basis points over US treasury,” he added. The bank is expected to announce fund raise plans this week.

ICICI Bank did not respond to a request for comment.
The fundraising comes after the RBI in June introduced a concessional swap facility that allows eligible external commercial borrowings by banks and state-owned companies to be hedged at a fixed rate of 1.5% per annum, compounded semi-annually. The scheme sharply lowers hedging costs, making overseas dollar borrowing more attractive for Indian lenders.

“We have partnered with various parties to provide leverage and are committed to making this initiative a success,” ICICI Bank Executive Director Sandeep Batra said in a post-earnings media call. “We will offer leverage based on the customer profile and on what our partners are providing; customers will get a reasonable return.”
ICICI Bank follows HDFC Bank and Axis Bank in tapping the facility. HDFC Bank raised $750 million through five-year senior unsecured dollar bonds via its GIFT City IFSC unit, pricing the notes at 90 basis points over US Treasuries for a yield of 5.067%, becoming the first Indian lender to use the RBI’s concessional swap window for overseas borrowings.Axis Bank subsequently raised $800 million through dollar bond issuances under the facility, comprising $500 million of Additional Tier 1 perpetual bonds priced at 6.87% and $300 million of five-year senior unsecured notes.

Indian banks have collectively mobilised $20.7 billion under the RBI’s special incentive window as of Monday, within six weeks of the scheme becoming operational. Of this, FCNR(B) deposits accounted for the largest share at $17.4 billion, followed by overseas foreign currency borrowings (OFCBs) at $2 billion and external commercial borrowings (ECBs) at $1.3 billion.

For comparison, the last time such a facility was operationalised, in 2013, it ultimately attracted $34 billion — $26 billion via FCNR(B) deposits and $8 billion via ECBs — helping cushion the fallout of the so-called taper tantrum.