Sun Pharma falls short of bond fundraising target amid rising yields

Mumbai: Sun Pharma raised ₹7,816 crore in five- and seven-year bond tranches, falling short of its ₹10,000-crore target as rising market yields meant investors demanded returns higher than what the country's biggest drugmaker was willing to pay, people familiar with the transaction told ET.

The drugmaker priced the five-year tranche at a coupon of 8.05% and the seven-year tranche at 8.20%. The fundraising came amid a recent hardening in government and corporate bond yields, which made investors more cautious about locking in returns at prevailing rates.

"The company managed to raise around ₹8,000 crore at the pre-fixed pricing, which is a fantastic outcome considering that market yields have moved up by 15 basis points," said a debt banker.


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The two tranches also received ₹2,100 crore in anchor investments from investors including general and life insurance companies, mutual funds, pension funds. The issuer planned to raise up to ₹3,000 crore through the first tranche, which carries a put option after 17 months, and ₹7,000 crore through the second tranche. A Sun Pharma spokesperson did not respond to requests for a comment.

The spread between sovereign debt and AAA-rated corporate bonds has compressed, with the 10-year government bond yield rising above 7.4%, leaving investors with a smaller premium for taking on corporate credit risk, particularly amid rising yields. Crisil Ratings has assigned AAA/Stable rating to the proposed NCDs.

"The 10-year government bond yield had risen to around 7.40%-7.45%, from about 7.36%-7.37% the previous week," another banker said.

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Corporate bond yields had also hardened by around 10-20 basis points in recent sessions, reducing the appeal of locking in longer-dated investments at earlier pricing levels.

SBI Capital Markets, Standard Chartered Bank and MUFG Securities India are arrangers of the issuance.