Rs 2,610 crore, long tenor bonds placed by the Shapoorji Pallonji Group – a landmark in infrastructure financing

shapoorjiBy Accommodation Times News Services

Mumbai, 10th August 2015: SP Jammu Udhampur Highway Limited, announces successful refinancing and placement of Non-Convertible Debentures of Rs 2,610 crores.

With this successful placement of the bond issue, the first refinancing of this scale the company achieves another landmark in the infrastructure space.

  • ·         At Rs 2,610 crores, this is among the largest private sector infrastructure bonds issued in India and is the largest bond in the roads sector.
  • ·         Backed by annuity payments from National Highways Authority of India and rated Provisional [ICRA] AAA (SO) Stable by ICRA.
  • ·         The issuer achieved an extremely tight pricing – an average 9.15% p.a. payable semi-annually. The large issuance size, the long tenor of the bond and the option to the Issuer to call back part of the bond make the pricing achieved a landmark in the corporate bond market.
  • ·         Issued in multiple series, with maturities starting Dec 2015 and ending Dec 2030, (~ 15 years) making this the longest tenor infrastructure asset backed bond issued in India.
  • ·         Proceeds of the bond were used to refinance the Issuer’s existing foreign currency and rupee loans, helping the company to lower its cost of debt and importantly eliminate exchange rate risk of the foreign currency debt.

SP Jammu Udhampur Highway Limited is a special purpose vehicle of the Shapoorji Pallonji group set up for the design, construction, development, finance, operation and maintenance of a 64.58 km highway stretch between Jammu and Udhampur awarded on a Build, Operate and Transfer (BOT) Annuity basis by the National Highways Authority of India. The bonds were rated Provisional [ICRA] AAA (SO) Stable by ICRA.

The deal marked many firsts :

o   The largest bond from the roads sector

o   The longest tenor infrastructure asset backed bond ~ 15 years

o   The first project backed bond to have a call option on part of the issue size and

o   Among the tightest pricing achieved by a project bond

o   Project completed significantly ahead of schedule in difficult terrain in J&K through group company Afcons Infrastructure Ltd.

The bonds received excellent response from high quality investors including mutual funds, insurance companies, banks.

Mr. S. Mukundan, Director of the company said “This project has many firsts – the first under construction project to be financed by an ECB at extremely competitive rates, completed ahead of schedule and received bonus and now this marquee issuance which will enable us to significantly reduce interest cost and mitigate exchange risks. Additionally this transaction clearly establishes the viability and attractiveness of the domestic bond market as an attractive source of funding for quality infrastructure assets  from credible developers. We have set a benchmark and hope this paves the way for financing of quality infrastructure assets beyond bank loans.

Speaking on behalf of the Shapoorji Pallonji Group, Mr. Jai Mavani, Group Executive Director, Shapoorji Pallonji & Co. Pvt. Ltd., said “This establishes another milestone and is an effective culmination of Shapoorji Pallonji Group’s strong project management skills through early completion, financial strength and a pro-active approach. It is also re-assuring for developers like us and will enable us to participate in the infrastructure building program with renewed enthusiasm. “

The Hongkong and Shanghai Banking Corporation Limited and Kotak Mahindra Bank Ltd., were Joint Lead Arrangers to the issuance.

Sujata Guhathakurta, Senior Executive Vice President and Head – Debt Capital Markets, Kotak Mahindra Bank said, “This is a marquee deal and should lead the way in financing infrastructure development in the country through debt capital markets. The deal delivers great value to both the issuer and the investors. We believe that the debt capital markets can provide significant amount of takeout financing to banks for financing infrastructure projects, which are of upmost importance to our country. Kotak has been at the forefront of this initiative, having been one of the first to structure an NHAI Annuity-backed bond in 2010 and now having completed the largest NHAI bond issuance”.

Mr. Hitendra Dave, Managing Director and Head of Global Markets, India for HSBC said: “HSBC is extremely pleased to be associated with this marquee transaction from the Shapoorji Pallonji group. The deal is among the largest infrastructure project bond from the private sector and will help the company realize its objectives of cost reduction and risk mitigation. The tight pricing is reflection of the sponsor quality, the strength of the underlying project and the robust structure of the deal. The deal has generated excellent response from the investor community with interest from all the different investor sub categories and across both ends of the duration spectrum. At a broader level, we believe the deal will aid in the development of the domestic corporate bond market by establishing capital markets as an attractive alternative to conventional bank financing for mature infrastructure projects – a development a lot of us have been waiting for for quite a while. We expect this transaction to accelerate this development”

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