IDBI Bank Ltd has raised Renminbi (RMB) 650 million or around $102 million from the debt market by issuing three-year Dim Sum bonds to investors in Hong Kong and Singapore markets, the first of its kind from India, according to a bank statement.
The three-year bond, listed on the Singapore Stock Exchange, was sold at a fixed coupon of 4.5 per cent per annum and was issued through the bank’s Dubai International Financial Centre (DIFC) branch. The fundraising is part of the bank’s $1.5 billion medium-term notes (MTN) programme. Hongkong and Shanghai Banking Corp. Ltd acted as the sole advisor to the bond sale.
Proceeds from the bond issue would be received on Nov 18, according to R. V. Iyer, chief general manager of IDBI Bank. The fund raised will be used to provide foreign currency loans to Indian corporate houses.
The bank initially intended to raise RMB 500 million in the 4.625 per cent area. But driven by the demand for an attractive, India-centric debut credit, the bond issue attracted interests from a diversified array of investors including banks and asset managers, resulting into an oversubscription of RMB 900 million. This, in turn, enabled IDBI Bank to tighten the pricing to 4.5 per cent and increase the issue size to RMB 650 million, a bank statement added.
Incidentally, in August this year, a unit of Infrastructure Leasing & Financial Services Ltd (IL&FS) had asked Deutsche Bank, RBS and UBS for a Renminbi-denominated bond offering in order to raise $200 million.
“We have been observing this fast-developing market segment for some time now, and in line with our objective of achieving low-cost funding, as well as diversifying our investor base, we decided to access this market last week in a nimble-footed manner,” commented R. M. Malla, chairman & managing director of IDBI Bank.
“The Dim Sum bond market is a fast-expanding market, driven by the growth of offshore RMB deposits. IDBI Bank decided to access this market as an attractive funding-cum-diversification play, as also to cultivate an entirely new and fast-developing investor class. The bank has already lined up assets which will be funded from the proceeds of the bond issue,” said Melwyn Rego, the executive director who was on the road shows at Hong Kong and Singapore.
Of late, a host of foreign companies, namely, Fonterra Co-Operative Group (New Zealand’s biggest company) and Mcdonald’s Corp, have been raising funds in the offshore Yuan market. Borrowers such as World Bank, Volkswagen and Caterpillar have also sold Dim Sum bonds, as they are widely known after a local cuisine.
With the Chinese currency gaining momentum, it might threaten the US dollar’s hegemony as an international reserve currency, according to an independent committee (US-China Economic & Security Review Commission) report, submitted to the US Congress.
“Chinese financial authorities are laying the groundwork for these ambitions via a series of bilateral arrangements with foreign companies and financial centers,” the commission said in its report.
“While dollar-denominated financial markets retain a substantial advantage over their RMB-denominated counterparts in terms of new issuances, the RMB markets have made remarkable progress in less than one year,” it added.