$6 billion in 2 weeks: India Inc bonds a big hit overseas
- IBEF
- January 18, 2022
Despite looming global risks, Indian corporations raised $6 billion by selling offshore bonds from January 1 to 14, the biggest in the opening fortnight of the year, demonstrating international investors' confidence in India's economy.
After receiving bids several times, the offer size, a group of borrowers including Reliance Industries (RIL), State Bank of India, JSW Infrastructure, Shriram Transport Finance NSE, and India Clean Energy were able to reduce their funding costs by 30-35 basis points compared to initial projections. A basis point is a fraction of a percent.
Investors have shown a great interest in Indian bond issues at a time when they are largely uninterested in other rising countries, particularly China.
"There is a growing consensus that India is delinked from most EMs and should be treated as a unique asset class," said Amrish P Baliga, managing director of Deutsche Bank India. "Indian issuers are seen as high-quality credit, and rates are tightening to reflect this."
According to Dealogic data, Indian companies raised $6.03 billion between January 1 and 14, up from $2.09 billion a year earlier.
Benefitting from Portfolio Diversification
This is also more over a fourth of the total $22 billion raised in 2021, which was a new high.
"Globally, the bond market is sluggish amid impending uncertainty due to monetary tightening and inflation concerns," said Pramod Kumar, managing director and head of Barclays India's investment banking. "International investors are diversifying their portfolios through emerging economies, which benefits Indian companies."
Concerns about the US Federal Reserve's rate hike path and China's Evergrande event have fueled worry, resulting in a weak global bond market.
Due to a lack of interest, Chinese real estate developer Country Garden Holdings was forced to suspend a $300 million bond sale last week. Following the Evergrande crisis, the property sector in that country has been struck severely by a string of defaults and missed loan repayments. Cash-strapped to postpone repayments, Chinese developers are negotiating new terms with bondholders. Last Thursday, Evergrande received such a significant endorsement.
"Interest rates are still around historic lows," JP Morgan India managing director and head of corporate banking PD Singh remarked. "Issuers have tapped the markets ahead of the rate hike cycle by taking advantage of investors' fresh allocations for 2022. India's strong economic recovery, along with a solid sovereign grade, has reignited investor interest in the country's debt." The US Treasury
benchmark has risen 31 basis points this year to 1.795 percent on Friday, although it is still much below its recent high of 3.26 percent set on October 9, 2018.
JSW Infrastructure has raised seven-year money thus far this year, offering 4.95 percent, 30 basis points lower than the initial price projection. This transaction took place at the same time as the Country Garden sale fell through.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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