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Indian companies raise $11.16 billion in overseas bond sales

Indian companies have raised $11.16 billion this calendar in overseas bond sales, higher than the $10.4billion raised the whole of 2012 as companies rushed to take advantage of low global interest rates.

, ET Bureau|
Last Updated: Jun 04, 2013, 10.03 PM IST
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MUMBAI: Indian companies have raised $11.16 billion this calendar in overseas bond sales, higher than the $10.4billion raised the whole of 2012 as companies rushed to take advantage of low global interest rates. But with yields on benchmark US treasuries on the rise, the demand may taper off.

Indian Oil Corporation, software firm Rolta India, Tata Motors, Tata Steel and ICICI Bank were among the companies from India which raised funds in Singapore dollar. Bharati Enterprises, Reliance Industries, 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, J P 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 instead of borrowing in US dollars because the size of fund raising it still tiny. Investors in the US demand higher ticket size because of their huge corpus. While last year, they borrowed $0.72 billion through Singapore dollars in the entire year, this year so far they have already borrowed $1.05 billion. There have been six issuances in Singapore dollars, data from Dealogic shows.

"Quite a few Indian issuers have tapped Singapore dollar market to diversify their investor base and access cheaper funds," said Randhir Singh, managing director, India head Financing, Deutsche Bank, "Further the covenant requirement is not as stringent as in the USD market,"

Some of the issuers have been able to raise funds in this market even without getting their bonds rated like TML and ABJA, wholly owned subsidiary of Tata Steel.

"Some of them have been able 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 US dollar space," Agarwal said.

But the rates may not remain attractive for long in the overseas markets 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, "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%. ONGC Videsh raised $799 million in tranche of 5 and ten year notes, but yields on these bonds have risen from 3.75% to 4.44% in case of 10 year bonds and 2.5% to 3.19% in case of 5 year bonds. Reliance Energy raised funds at 5.4% this year.

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