Indian IT major HCL Tech priced its debut dollar bond on Wednesday, raising $500mn via a 5Y bond at a yield of 1.477%, 75bp over Treasuries and 25bp inside initial guidance of T+100bp area. The bonds will be issued by HCL America Inc. and guaranteed by HCL Technologies and carry a coupon of 1.375%. The issuance set the record for both, the highest rated and tightest spread, for an Indian dollar bond with an issue size of at least $100mn. The bonds have an expected rating of A- by S&P, in line with the guarantor’s rating and three notches above the India’s sovereign rating of BBB-. As per a lead manager on the deal, HCL’s new bond offer a pick-up compared to similar rated US tech names such as IBM or Adobe, rated A2/A that would price at a spread of 50-55bp over Treasuries. Orders peaked at $1.7bn but later fell to $850mn with US taking 45%, Asia 39% and EMEA 16%. In terms of investor type, asset managers took 83%, SSAs and insurers 14% and banks, private banks and others 3%.
As per S&P, the guarantee is capped at 105% of principal, implying that it will not fully cover all interest and principal payments and does not explicitly contribute to the rating of the bonds. HCL Tech is India’s third-largest IT company by market cap after Tata Consultancy Services (TCS) and Infosys. For 2020, HCL Tech reported revenues of $10bn, EBITDA margin of 26.5% and a profit of $1.8bn.
