INDIA'S largest asset financing company Shriram Transport Company (STFC) on January 8 priced the country’s first international public social bond amounting to US$500 million.
The 3-1/2 year Reg S/144A deal was priced at par with a similar coupon and re-offer yield of 5.10%. The bond issuance is guided by STFC’s social finance framework, which is aligned to the International Capital Markets Association (ICMA) social bond principles. The proceeds from the bond would be used for employment generation, including through micro, small and medium enterprise (MSME) financing and microfinance.
STFC has obtained a second party opinion from Sustainalytics, which describes the social bond framework as credible and impactful, and an independent limited assurance report from KPMG.
In marketing the transaction, STFC engaged investors in Hong Kong, Singapore, London and the US through a series of calls on January 6. On the back of a strong investor feedback, the deal was launched with an initial price guidance in the 5.37% area. Following a strong book building process supported by high quality long-only investors, STFC was able to tighten pricing by 27.5bp to 5.10%.
The offering, which was drawn under STFC’s US$3 billion global medium-term note programme, was more than 4x covered as it garnered a total demand in excess of US$2.20 billion. It attracted a 50% participation from the US, 37% from Asia and 13% from EMEA. By type of investors, asset managers accounted for 85% of the paper, banks 5%, insurance companies 5%, and private banks and other investors 5%.
In pricing its first social bond, STFC managing director and CEO Umesh Revankar says social impact continues to remain a focus area for the company. “The social impact is similar to our priority sector with some strict exclusion and has big interest from the international investor community,” he adds.
Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Emirates NBD Capital, HSBC, ING, J.P. Morgan and Standard Chartered acted as the joint bookrunners and lead managers for the transaction.
Indiabulls Housing Finance actually sold the first social bond out of India in January 2018, when it printed a 10-billion rupee (US$140.92 million) Masala bond, with the proceeds deployed for a low-cost or affordable housing programme.