Leveraged loans return to India

Reuters HONG KONG/SINGAPORE | Updated on July 17, 2020

Two large leveraged financings are taking shape in India, providing a welcome vote of confidence for the country's loan market amid the coronavirus pandemic.

Baring Private Equity Asia is borrowing up to US$600m to delist IT provider Hexaware Technologies, in which it took a majority stake in 2013, while KKR is lining up a US$210m LBO financing for its acquisition of a majority stake in JB Chemicals & Pharmaceuticals.

The financings come amid a sharp decline in deal flow and a slump in economic activity, as large parts of India remain under a lockdown that was first imposed on March 25 to limit the spread of Covid-19.

“India is not necessarily a big hunting ground for LBO loans when compared with developed markets in Asia, but whatever deal flow emerges this year is welcome,” said one senior leveraged finance banker in Singapore.

“It is no secret that 2020 will be a challenging year for most market participants, so any opportunity to make returns will be pounced upon.”

Lenders are also eyeing opportunities around Carlyle Group, which is looking at investments in India totalling around US$935m in businesses as diverse as pharmaceuticals, animal healthcare and data centres.


Baring's decision to mandate nine banks for its financing, which, at US$600m, would be India's largest leveraged loan, illustrates lenders' healty appetite for assets. Such a top-heavy arranger group for a deal below US$1bn is uncommon in Asia, even for plain-vanilla loans.

The size of the bank group is also partly down to the fact that Baring had already announced plans to take Hexaware private, removing the issue around confidentiality. When privacy is an essential consideration in an acquisition-driven deal, for example, borrowers favour having one or two lead banks.

Proceeds from the Hexaware deal will be used to repay bonds sold by its shareholding vehicle, HT Global IT Solutions Holdings.

The US$368m 7% senior secured bond is due in July 2021, but the borrower is exercising a call option this month and will repay around US$385m as a result.

The final size of the loan will depend on how much more Baring needs to complete the general offer it announced in June for the 37.6% of Hexaware it does not already own.


Baring raised a US$215m loan in 2013 to back the original buyout of Hexaware and then followed that up with a US$250m dividend recapitalisation financing in March 2015.

In August 2013, Baring acquired a 41.8% stake in the company, which is subsequently increased to a majority stake. The investment was initially funded by a US$215m borrowing that comprised a US$185m five-year amortising loan with a margin of 500bp over Libor and a US$30m nine-month bridge-to-cash piece.

The deal featured leverage of around 2.52x earnings, based on Ebitda of US$85m. In March 2015, Baring clubbed a US$250m five-year dividend recap with nine lenders.

Some of the lenders from the previous Hexaware deals are already in the arranger group for the latest loan.

Baring has a burgeoning track record in Indian leveraged finance. Last December, it wrapped up a US$265m five-year loan for its LBO of healthcare-focused IT services provider CitiusTech. In October 2019, it raised a US$360m five-year loan that backed its buyout of India's NIIT Technologies.

The loans for CitiusTech and NIIT Technologies had leverage multiples in the low 5x and 4.25x. The latest loan for Hexaware has gearing of slightly over 4x.


KKR has mandated four banks on the US$210m loan for its LBO of JB Chemicals, which comes with a leverage multiple of around 4.2x.

The private equity giant had not borrowed for an Indian LBO since September 2015, when it closed a US$100m three-year bullet term loan to back the purchase of a nearly 40% stake in Gland Pharma, which was then an unlisted company.

And Carlyle, too, could raise debt to support its three investments: a 20% stake in Piramal Pharma for US$490m, a stake of approximately 25% in Indian telco Bharti Airtels wholly-owned data centre business Nxtra Data for US$235m, and a 74% stake in SeQuent Scientific, the largest animal healthcare company in India, for US$210m.

Carlyle's highest-profile Indian loan to date was a US$500m four-year loan backing its purchase of a 5.6% stake in mortgage lender Housing Development Finance Corp in 2007.

Should any debt financings materialise for Carlyles investments this year, it will lift leveraged loan volumes in India close to the US$1.04bn raised in 2019, according to Refinitiv LPC data.


Published on July 17, 2020

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