REC raises USD 700 million in largest transaction by an Indian NBFC

Rural Electrification Corporation (REC) has raised $700 million (around Rs 5,140 crore), 5-year bond from its inaugural foray into the 144a market (US Securities and Exchange Act 1933) by using the newly established Global Medium Term Programme of USD 5 billion.

“Proceeds of the bond will be used to finance power projects in accordance with the approvals granted by Reserve Bank of India (RBI) from time to time and in accordance with the ECB Guidelines,” said the company in a statement.

The 5-year benchmark has a semi-annual coupon of 5.25 per cent per annum and a maturity date of 13 November 2023. The transaction saw an oversubscription of around 2.5 times with active participation from over 90 investor accounts. REC decided to upsize the deal to USD 700mn from the earlier benchmark target to accommodate keen investor interest in this maiden 144A issuance.  The final Order Book has been over $1.1 billion from over 90 accounts with US contributing 41%, 21% from European Union and 38% from Asia. Subscription amounting to 42% made by Asset/Fund Managers, 21% by Banks, 26% by INS/PEN/Pub Sec and 11% byPB.

Commenting on the occasion, Dr. P.V. Ramesh IAS, Chairman and Managing Director, REC Limited said, “We are very delighted on the successful launch and completion of this transaction which establishes REC Limited’s status with largest USD bond transaction for a non-bank financial institution. This transaction is also the first 144A deal completed by an Indian NBFC and Indian CPSE. I would like to take this opportunity to commend on the hard work by the team which allowed the company to tap the markets in record time from mandate to execution.”

In addition, Ajeet Kumar Agarwal, Director (Finance), REC Limited said, “the transaction allows the company to diversify funding sources and tap into the US investor base. REC Limited now has established a robust investor base across onshore and offshore loan as well as bond markets.”

Barclays, Citigroup, HSBC, J P Morgan, MUFG and Standard Chartered Bank were the joint bookrunners for the issue. This is REC’s fourth venture into the international bond market over the last 18 months. In July last year, it became the first Indian PSU to launch Green Bonds denominated in US Dollars.

REC had raised $450 million through the sale of its maiden USD Green Bonds on the London Stock Exchange (LSE).