Corporates to witness record issuance of bonds: Barclays

Mumbai, Jan 22 | Updated: Jan 23 2007, 05:30am hrs
In a bid to fund their expansion in an economy that has grown by an average of 8% for the past three years, Indian corporates are bound to witness second consecutive year of record issuance of bonds and bonds convertible in to equity in 2007, says a Barclays release.

Further the release said that the sale of bonds and convertible bonds by Indian companies and financial institutions surged to $7.8 billion in 2006, a 47% increase in 2005. This record amount includes a 22% increase in convertible bond issuance to $4.9 billion and overseas bond issuance of $2.9 billion, more than double the $1.3 billion raised in 2005.

Commenting on this growth Madan Menon, Co-CEO of Barclays Capital in India, said, For this year, I believe the growth trajectory will be far steeper and more robust. Indian issuance in the bank and capital markets will only get stronger and will be equally well received. The surge in issuance in 2006 from India followed the introduction of new regulations mid year by the Reserve Bank of India allowing local banks to raise perpetual debt, which is treated as tier 1 capital, and upper tier 2 debt maturing in at least 15 years. In 2005, India was sixth amongst Asian countries in terms of bond issuance with $625 million.

In 2006, India jumped to second place with issuance of $2.29 billion. Indian companies need funds to fuel future growth and we expect this to continue for the foreseeable future, said Menon. We see continued strong demand for quality issues that are reasonably priced in both the bond and convertible bond markets. Barclays Capital managed six of the 11 bond issues by Indian banks in 2006, underwriting a total of $930 million. Of the 11 deals, seven involved subordinated debt.