Lodha Developers hopes for second-time lucky

The Indian real estate company is returning to the global debt market for a second time citing better market conditions.
India on track to join Asia's high-yield market
India on track to join Asia's high-yield market

Lodha Developers is attempting a second Reg S-only dollar-denominated bond issuance after failing to raise one back in December, blaming market head winds.

Fixed income investor meetings begin on Wednesday in Singapore and Hong Kong, according to a source familiar with the matter.

It is still early, so there is no price guidance as yet, but Barclays, CLSA and JP Morgan have been mandated by the issuer to arrange the meetings. Back in December, when Lodha postponed a five-year bond with the option to call in year three, initial price terms were around mid-to-high 10% area. Bank of America Merrill Lynch and JP Morgan were the joint bookrunners then.

Fitch subsequently withdrew its B+ rating for the proposed bond, which was to be issued by the firm’s overseas subsidiary Lodha Developers International (Mauritius).

Largely at fault was a ruling by the Reserve Bank of India that effectively outlawed a new structure pioneered by Greenko Group, which had promised to open up offshore bond markets to a wider range of Indian issuer, mostly high-yield names.

That sent jitters across Indian credit space, briefly closing the market to the likes of Lodha as well Reliance Communications, which opted for a loan after trying unsuccessfully to sell a bond.

Budget boost

Nonetheless, these concerns have since dwindled and Lodha’s roadshow comes shortly after India’s business-friendly budget statement on February 28.

The budget's pledge to continue structural reforms and reduce infrastructure bottlenecks is widely seen as positive for the Indian economy, and with the government on course to meet its 2014/15 4.1% budget deficit target its credibility has been enhanced. This, in turn, has boosted the investor appeal of India, the so-called third pillar of Asia's high-yield debt market along with China and Indonesia. 

Year-to-date Indian dollar-, euro- and yen-denominated corporate bond volumes are already at $2 billion, compared with the paltry $343 million achieved during the same period of last year, Dealogic data shows. 

The last Indian corporate issuer to raise a dollar bond was Reliance Industries in February, when it sold a $750 million 30-year offering. It was the Mumbai-based oil and gas company's second dollar-denominated paper this year. 

Lodha is the largest India-based residential real estate property developer by sales with a penchant for high-end residential developments in Mumbai.

In financial years 2013 and 2014, Lodha's aggregate contracted sales by value were higher than those of India's second- and third-largest property developers combined.

Lodha's land bank of 25 million square metres is also among the largest in India and has been externally valued at more than $10 billion. The company expects its current land bank to support developments and sales for the next seven years. 

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