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Barclays funds Rakesh Jhunjhunwalas’ Zydus deal


Barclays has bankrolled Rakesh Jhunjhunwala’s recent acquisition of stake in Cadila’s animal healthcare business.

An arm of the British banking group is learnt to have bought out the entire Rs 500-crore zero-coupon bond offering by Rare Equity Private Ltd (REPL), a Jhunjhunwala controlled company, in what was a rare borrowing by the ace investor in the bond market.

The fund-raising is backed by pledge of shares and personal guarantee of Jhunjhunwala and his wife Rekha Jhunjhunwala.

REPL issued non-convertible debentures (NCD) in two tranches, with maturities of three years and one day, and four years and one day, generating a yield of around 7.75% for Barclays. “It’s a very good rate for the borrower.. it’s kind of name lending,” said a bond market source.

According to the agreement, the stocks pledged are out of a preapproved list of shares provided by the lender or are scrips in the BSE100 basket, which form 80% of the total pledge. Stocks outside BSE100 are capped at 20%. The pledge is designed in such a way that there should be at least 5 stocks, with the contribution of a single stock and any sector capped at 30% and 50% of the total pledge basket, respectively. Also, the terms lay down that pledged shares from any single promoter holding group, except the Tata group, would not exceed 40%. For Tata group company shares, a higher cap of 55% would apply. ET’s e-mail to Jhunjhunwala went unanswered till the time of going to press. A Barclays Bank India spokesperson said the bank would not comment on the matter. The MNC bank entity is learnt to have made the investment via Reserve

’s ‘voluntary retention route’ (VRR).

RBI introduced it in March 2019 to attract long-term investments by foreign portfolio investors (FPIs) in the debt market.

Investment through the VRR window is allowed over and above the general investment limits for FPIs, as long as the offshore institutional investor promises to hold on to 75% or more of the allocated investment for at least three years. RBI had also laid down 75% of this ‘committed amount’ must be invested within three months from the date of allotment of investment limits. In view of difficulties expressed by FPIs and their custodians on account of Covid-19 related disruptions in adhering to this condition, RBI in May 2020 allowed an additional three months to FPIs to meet the norm.

Based on the pledge, guarantee and completion of certain documentation, credit rating agency Acuité has given ‘double-A plus’ rating and ‘stable’ outlook to the NCDs issued by REPL. The rating considers support of resourceful promoters of REPL i.e. Rakesh Jhunjhunwala and Rekha Jhunjhunwala. The rating further derives comfort from the strength of the structure which has laid out stringent conditions on identification of securities to be pledged, the times cover to be maintained and covenants governing stock/sector concentration, top-up scenarios and conditions, payment mechanism, besides mandating non-disposal undertaking (NDU) on issuers partial ownership in shares of acquiring company.

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