India bond house
Trust Investment Advisors was at the centre of efforts to develop the rupee debt market in 2014, using its solid relationships to broaden the investor base for new structures in the bank capital and property sectors.
India’s bond markets were in a recovery mode in 2014 after huge outflows of capital in the second half of the previous year and a standstill in the domestic market, as a result of some unclear regulation. Bond volumes, however, bounced back later in the year – thanks in part to the new products that Trust Investment helped introduce.
As a non-bank arranger in a market where deals require true underwriting risk, Trust Investment managed to compete head-to-head with rivals wielding far larger balance sheets. The company used its Rs10bn-odd (US$161m) proprietary trading book carefully, quickly distributing its risk to end investors, and making bold calls on innovative structures where others shied away.
It was the sole arranger on India’s first bonds backed against rental income from commercial properties – a structure that many rivals had argued would never fly with investors. Nine such deals had been assessed since 2009, but none made it to the market.
Between May and June, Trust Investment sold two such offerings, totalling Rs9bn, for the DLF Group. The tightly structured bonds offered the company an attractive cost of funding, coming at yields of 10.9%. More importantly, these benchmark deals helped diversify funding sources for a sector with funding needs of around US$60bn and provided a template for other deals.
Nipa Sheth, Trust Investment’s managing director, said the firm had been the only arranger that was confident of finding investors for the product. In the end, the two DLF deals were 2x subscribed with 20% of the paper going to sovereign wealth funds.
Trust Investment was also at the forefront of the introduction of Basel III-compliant bonds, another key theme during the review period.
In August, Trust Investment jointly arranged the first Additional Tier 1 bond from a state-owned lender, underwriting Rs6.25bn of a R s25bn 11% perpetual non-call 10-year issue for state-owned Bank of India. Amid lingering doubts over investors’ appetite for the new-style, loss-absorbing format, the deal unearthed a deeper-than-expected local bid for bank capital securities.
Trust Investment also displayed its distribution capabilities earlier in March when the firm sold nearly 30% of the jumbo Rs80bn 9.95% bond from state-owned Food Corp of India. It was the largest state-guaranteed and most traded corporate bond in India.
Trust Investment ranked No 2 on the Thomson Reuters rupee bond league table for IFR’s review period, having arranged 132 deals for Rs209bn.
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