ICICI Bank eyes $500 million through foreign loan

MUMBAI: India’s biggest private-sector lender ICICI Bank, which raised $500 million in a bond sale last week, is in talks to garner a similar amount through an overseas loan as it leverages the central bank’s liberal debt-refinancing terms for top-rated local companies.

ICICI Bank has approached at least four foreign banks, including DBS Bank, United Overseas Bank (Singapore), HSBC and BNP, for the loans, two persons familiar with the matter told ET. It may be priced at 120 basis points over and above the London Interbank Offered Rate (LIBOR). The loan would be of five-year maturity.

“Talks are on between the proposed issuer and banks. The Christmas season may delay the syndicated loan raising plan by a few weeks to January,” said one of the persons cited above.

An email sent to ICICI Bank remained unanswered until the publication of this report. Individual foreign lenders could not be contacted immediately.

While the overseas loan market is easy to access, the bond market demands greater compliance. The loan market mostly involves bilateral dealings, with no significant attention paid to the issuer’s ratings. Bond sales, on the other hand, involve a much wider investor base across the world, helping in brand building.


“In the bond market, the price discovery is much finer as investors bid across the world. A better pricing in dollar bonds should help a borrower to get a cheaper rate in syndicated loans,” said a senior executive at a foreign lender.

Last week, the bank raised $500 million in a dollar-denominated bond sale to global investors at a coupon of 3.83%. Those bonds were issued through the Dubai branch of ICICI Bank and were of 10-year maturity.

The bank had an initial price guidance of 170 basis points over the US treasury. It settled at 20 basis points less amid high investor demand.

Global rating company Moody’s assigned a Baa3 rating to the issue with a stable outlook, the lowest in investment grade. Citigroup was the sole advisor to the deal.

RBI has permitted overseas branches and subsidiaries of Indian banks to refinance external commercial borrowings (ECBs) of triple-A rated public sector and private sector companies, potentially lowering corporate borrowing costs and expanding the overseas credit market for domestic lenders.

In an announcement after the fifth bi-monthly policy review, RBI said ECB refinancing, which was restricted to only foreign lenders, will now be permitted for Indian banks as well.

“ICICI Bank is known for its overseas fund-raising. Whenever there is an opportunity to raise money at a reasonable rate, it just seizes the opportunity, anticipating future business potential,” said another person, who did not wish to be named.