Last year, India Inc raked in a whopping $16 billion, up 60%from 2012, through international debt market to meet their working capital needs as well as to retire high cost rupee debts.
Leading the chart this year is State Bank of India, which last Friday sold bonds worth $1.25 billion in a dual tranche issue to international investors. This record sale was preceded by a $1-billion issue by the state-run Oil India, in its debut foreign bond sale last Tuesday.
Investment bankers attribute the rise in forex borrowing to the elevated debt servicing cost in the domestic market and skimpy margins due to the lingering economic slowdown, which has entered the third year now. And going by the large dollar mop-up this year so far, merchant bankers are of the view that 2104 may better the 2013 record.
As per investment bankers, close to $6 billion bond sales are in the pipeline before July from a clutch of big corporates like Bharti Airtel which is planning to raise $2 billion before July, OVL, IFCL etc.
Other issuers include Power Finance Corporation which is planning up to $700 million issue, Rural Electrification Corporation which is tapping a $1-billion issue, and IFCL which is eyeing close to $1.5 billion in forex bond sale.
ONGC Videsh is also planning a benchmark issue shortly to raise $500-700 million to fund its Mozambique oil and gas block acquisition. According to the company, the proceeds will be used to pre-pay a bridge loan of $2.2 billion it had raised earlier this year for the Mozambique oil blocks.
Overseas fund raising by domestic corporates had came to a near halt following the May 24, 2013 tapering talk by the US Fed.
But investment bankers say that domestic firms can still save up to 5% in interest cost by raising forex debt in comparison to rupee loans, hence the renewed interest.
At present, the US treasury rate is in the realm of just about 2.75%, while in the country it's nearly three-times higher.
Since the tapering talk in May and December, there were only three main debt issuance from the country HDFC Bank's $500-million issue in October, ICICI Bank's $750 million in November and Bharti Airtel's 750 million euro issue in December.
Last Friday, State Bank sold Reg S bonds worth $ 1.25 billion in a dual tranche issue to international investors, who have lapped up the issue 6.4 times its size.
The SBI issue is the single largest issue ever by a domestic issuer.
StanChart India capital markets head Jujhar Singh said Oil India's $1-billion bond issuance was its inaugural Reg S issue and the largest ever issuance by a PSU to date, and reaffirmed international bond investors' strong interest for issuance by high-quality debt from the country.