Lodha $ bond yield surges in shallow market

ET Intelligence Group: The prices of dollar denominated bonds issued by Lodha Developers overseas have fallen sharply from $104.13 on August 29,2018 to $88.14 now. They now trade at 23 per cent yield-to-maturity (YTM), leaving markets wonder whether the international bond holders are contemplating stress in the company’s operations amid sluggishness in the Indian realty sector and weakness in the rupee against the dollar.

A fall in bond prices may also reflect low liquidity condition or lack of depth in the market.

“Our bond is held to maturity by most investors and hence, thinly traded — the pricing stated by you could be the result of a very small sale,” said a spokesperson of the Mumbai-based realty developer. “Bonds by emerging market issuers, including various Indian corporates, have fallen in price over the last three months because of global macro factors such as oil prices. We expect our bond price to revert to similar premiums as emerging market debt strengthens in response to oil price moderation,” he added.


Industry experts and fund managers ET spoke to also said that the lack of depth in the bond markets may be a reason for this. But, some pointed out that the fall in the rupee and the liquidity crunch may also have triggered the selling.

“Bond holders could be concerned over the developer’s ability to pay back, with the rupee sliding and the liquidity crunch over the past few weeks. But there does not appear to be any stress from what I hear,” said a fund manager on the request of anonymity.

Lodha’s consolidated net debt at the end of 2017 was nearly Rs 14,000 crore according to the DRHP filed by the company. EBIDTA for the year was Rs 1,306 crore and interest paid was Rs 125 crore. The company had plans to bring out the IPO earlier in 2018. However, the issue has been deferred due to weak market conditions according to sources.

The dollar bonds were issued by the company’s subsidiary Lodha Developers International in two tranches and will be maturing in 2020. In the first tranche, the company raised $ 200 million at 12 per cent coupon rate in FY16 and the second tranche of $125 million was raised at 8.9 per cent coupon in December 2017. These bonds are listed on the Singapore Stock Exchange (SGX).

When the 12 per cent notes were first issued by Lodha Developers International it was rated Ba3 by Moody’s. However, the ratings agency downgraded these bonds twice over the last two years.