India Inc raises $11 billion via overseas bonds
Indian companies have raised $11.16 billion this calendar year in overseas bond sales, higher than the $10.4 billion raised in full year 2012 .
IndianOil, Rolta India, Tata Motors, Tata Steel and ICICI Bank were among the companies from India which raised funds in Singapore dollar. Bharati Enterprises, RIL, ONGC Videsh, and Suzlon Energy accounted for $5 billion, data from Dealogic shows. “Last year, there were only banks (as issuers), but this year we have had large-ticket corporate issuances too,” said Madhur Agarwal, head, debt capital markets, JP Morgan. “The jump in volumes is largely due to their participation. Banks play on floating rates, so they can still afford to borrow at higher rates.
But corporates cannot do that. So, they wait for rates to come off before raising money overseas.” Some companies have chosen to borrow in Singapore dollars than in US dollars because the size of fund raising is still tiny. Investors in the US demand higher ticket size because of their huge corpus. While they borrowed $0.72 billion through Singapore dollars in the entire year, they have already borrowed $1.05 billion this year so far. There have been six issuances in Singapore dollars, data from Dealogic shows.
“Quite a few Indian issuers have tapped the Singapore dollar market to diversify investor base and access cheaper funds,” said Randhir Singh, MD, India head (financing), Deutsche Bank. “Further the covenant requirement is not as stringent as in USD market,” he added.
Some of the issuers have been able to raise funds even without getting their bonds rated like TML and ABJA, wholly owned subsidiary of Tata Steel. “Some of them have been able to raise resources without getting the bonds rated at a reasonable pricing, which would have come to a much higher spread if they were to do issues in the US dollar space,” Agarwal said. But the rates may not remain attractive for long with yields firming up amid speculation that the US Fed may reduce its quantitative easing, or easy money policy.
“I still feel it is cheaper for companies to borrow in rupee currently,” said a bond dealer from a foreign bank, adding, “After the rise in US treasury yields, the arbitrage we used to talk about last year has become non- existent.” Vedanta Resources issued dollar bonds at 7.12%, which are currently trading at 7.16%.