The issue broke the record of Axis Bank, which sold USD 500 million of 3.25 percent 2020 bonds last month priced at 170 basic point over Treasuries.While investors have turned a tad cautious over the Indian high-yield sector due to complicated structures and more restrictive RBI guidelines for foreign borrowings, appetite for quality investment-grade names out of the country remains robust, investors say.

With a further boost from the strong November non-farm payroll growth in the US, the largest private-sector lender decided to do the opportunistic tap, which raised the total outstanding on the existing issue to USD 700 million.
The tap offered a negligible new-issue premium as its existing 2020s were indicated at 163 basic point over Treasuries prior to the reopening. The tap came with a lower all-in yield of 3.356 percent, versus a yield 3.57 percent on the existing notes.The leads also referenced private-sector peer Axis Bank's 2020s, quoted at G-spread of 169 basic point. Yet,the ICICI tap priced through that on the back of strong demand from investors outside Asia.

Axis Bank's stressed asset ratio as of September 30 stood at 4percent, compared with 6 percent for ICICI. The distribution of the Reg S tap, with ICICI's Dubai branch as the issuer, defied the typical 70/30 split between investors from Asia and elsewhere for Asian deals. Middle East investors showed enormous appetite for ICICI, buying 39 percent of the notes.

European investors also bought an impressive 32 percent, while Asia took the remainder."The distribution speaks volumes about how well-known ICICI is among global investors," said a banker on the deal. "That's why the tap went for a Reg S-only format versus the 144A/Reg S format for the initial issue."

Meanwhile, India's private-sector banks were likely to lead the improvement on asset quality in the near future, said Nomura. Against a narrowing fiscal deficit, declining inflation and rising GDP growth in India, "we expect the asset quality cycle to bottom out over the next two to three quarters, led by private sector banks and large public sector banks," analysts at Nomura wrote in a research note on December 5.

The analysts, however, expects the recovery to be gradual during 2015-2016 with Indian banking system's non-performing loans ratio and total stressed assets ratio to remain largely unchanged at around mid-4 percent and 10-11percent, respectively.The ICICI reopening was indicated a tad wider at bid-167 over Treasuries. HSBC and JP Morgan ran the deal, which is expected to be rated Baa2 by Moody's and BBB.


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