The REC Limited (Formerly, Rural Electrification Corporation of India), a public sector enterprise under the Government of India, has raised $700 million through initial foray of its $5 billion global medium-term-note (GMTN) program into the 144a market (US Securities and Exchange Act 1933).

Proceeds of the bond will be used to finance power projects in accordance with the approvals granted by the Reserve Bank of India (RBI) from time to time and in accordance with the European Central Bank (ECB) guidelines.

Per REC, the five-year benchmark has a semi-annual coupon of 5.25 percent per annum and a maturity date of November 13, 2023. It offers investors a reoffer spread of 240 basis points over the five-year UST.

The transaction saw an oversubscription of approximately 2.5 times with active participation from more than 90 major international investor accounts. REC decided to upsize the deal to $700 million from the earlier benchmark target to accommodate keen investor interest in this maiden 144A issuance from REC.

Per a release shared by REC, “The final Order Book has been over $1.1 billion from over 90 accounts with United States contributing 41 percent, 21 percent from European Union and 38 percent from Asia. Subscription amounting to 42 percent were made by asset/fund managers, 21 percent were made by banks, 26 percent were made by by INS/PEN/Pub Sec and 11 percent by PB.”

This is the largest dollar transaction from any Indian non-banking finance company (NBFC) and the first issuance under 144A by an Indian NBFC and Central Public Sector Enterprise (CPSE). In the backdrop of weak Emerging Markets headlines and recent volatility in the Indian NBFC sector, the global investors have reaffirmed strong confidence in the corporate governance, sound management, strong fundamentals of REC.

Commenting on the occasion, Dr. P.V. Ramesh IAS, Chairman and Managing Director, REC 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.”

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.”

REC had launched its $5 billion GMTN program on the Global Securities Market (GSM) in October 2018.

Image Credit: REC India Limited