Adani Transmission revives US private market placement after a decade

Adani Transmission Ltd raised $310 million in the US private placement market by placing 30-year paper last week. This was the first time in more than a decade an Indian company had managed to raise funds from the US private placement market.

In 2007, a string of Indian companies led by Indian Oil, Indian Railways, Tata Chemicals and Reliance had raised funds from the US private placement market. But since then, the American investors were reluctant to invest in the Indian paper after their bad experience with Reliance Energy paper – which lost its investment grade following a split between the Ambani siblings. Though Reliance Energy had offered to pre-pay the notes to the investors, the Reserve Bank of India did not clear the proposal – leading to a long wait for the investors to exit their investment.

“Some of the marquee long term American investors like Metlife invested in ATL paper – thus showing their confidence in the Indian economy yet again,” said a banker asking not to be quoted. “Post Reliance Energy fiasco, some of the investors avoided India but with this investment, it looks like they have changed their mind about Indian companies,” the banker said.

In November last year, ATL had raised bonds worth $500 million. It was priced to yield 4.295 per cent. These bonds are now traded at 4.19 per cent and the private placement pricing was based on this rate, the source said. While raising funds from the US market, a company has to maintain very stringent debt covenants. The proceeds of the debt will be used for retiring older loans.

On Monday, ATL shares closed at Rs 332 a share on the BSE thus giving a total market valuation of Rs 36,491 crore to the company. Adani Transmission has over 14,000 kilometres of electricity lines and has over three million customers.