Indian IT solutions company Rolta India Limited (NSE:ROLTA)’s wholly owned subsidiary, Rolta LLC, raised $200 million.

India

India Junk Bonds First Yield

This deal signifies India’s first ‘junk’ bond this year, with U.S. investors lapping up a large part of the offering by the midsize technology company.

Rolta India Limited (NSE:ROLTA) announced that the successful pricing of 10.75 percent Senior Notes in the international markets, was oversubscribed by 2 times. The demand came from a high quality investor base with over 70 accounts globally. While asset managers contributed 72 percent of subscriptions, banks and retail accounts contributed 10 percent and 18 percent respectively.

The offering was well-subscribed across geographies with 47 percent contributed by Asia and 43 percent by the U.S.

This issue is India’s first high-yield issuance this year and the first from a mid-cap Indian company in a while. The lack of such high-yield issuance from India stands in stark contrast to China.

During 2013, Chinese property companies have dominated high-yield, propelling volumes to record high.

The Senior Notes from Rolta have a tenure of 5 years and are guaranteed by Rolta India Limited (NSE:ROLTA) and its subsidiaries, Rolta International, Inc., Rolta Middle East FZ-LLC, and Rolta U.K. Ltd. The Notes have been rated as BB- (S&P) and BB- (EXP) (Fitch). The proceeds from the Notes will be used for refinancing existing debt, to meet working capital requirements and for general corporate purposes. The Notes will be listed on the Singapore Exchange Securities Trading Ltd. (SGX-ST).

Rolta India Limited (NSE:ROLTA)’s offer is being seen generous for an issue that is rated BB- by Standard & Poor’s and Fitch. It offered a generous pick-up over comparables such as BB-rated Digital Globe’s 2021s which were yielding 4.9 percent. i-Gate Corp’s 2016 were yielding 5.672 percent, while Sound Global’s 2017s were yielding 8.8 percent with both of them rated B+

Barclays PLC (NYSE:BCS) (LON:BARC), Citigroup Inc. (NYSE:C), DBS and Deutsche Bank AG (NYSE:DB) (ETR:DBK) acted as Joint Lead Managers to the Notes offering. DLA Piper and Davis Polk were U.S. counsels to Rolta and to the Joint Lead Managers, respectively, while AZB and Trilegal advised Rolta and the Joint Lead Managers, respectively, on matters of Indian law.

In the past, larger Indian companies such as Vedanta have sold high-yield dollar bonds, though there has been scare issuance from smaller companies. Issuance has been hampered partially by the 20 percent withholding tax on offshore bonds, with the exception of infrastructure companies. Besides the Reserve Bank of India regulations cap the cost of external borrowings for Indian companies at Libor plus 500 bp. However companies can circumvent the restrictions by issuing through offshore entities and keeping the funds offshore.