IOB to raise $2 billion through overseas bonds

Indian Overseas Bank (IOB) is planning to raise $2 billion through overseas bond issuances in two years, bank CMD M Narendra told FE.

The bank has been regularly tapping funds from the overseas market over the years to meet the growing demand of loans from offshore operations of domestic corporates. The Chennai-based lender had raised $500 million in the last fiscal. In the first quarter ended March 31, IOB?s overseas advances grew nearly 23% year-on-year to R15,854 crore.

The bank plans to raise the funds from the overseas market in four tranches of $500 million each. The Chennai-based bank is expected to hit the foreign debt market in 3-4 months from now, according to the bank?s chief.

?We have got the approval from the board to raise $2 billion from the overseas bond market and we will raise about $500 million in the next 3-4 months,? Narendra said.

The bank has retained RBS, HSBC, Standard Chartered, Citi and Morgan Stanley as book runners for the probable issue.

This year about $11 billion has been raised through foreign currency bonds by 17 Indian companies and banks including three Tata Group companies, RIL, State Bank of India, Bharti Airtel, HDFC Bank and Suzlon Energy. These companies have paid record low coupon rates while raising funds this year as the global markets was flush with liquidity and investors appetite for risk remained buoyant.

But the rush of dollar bond issues from Indian corporates and banks may start to slow down due to the changing global environment. Federal Reserve chief Ben Bernanke recently indicated it may start to pare down it?s asset purchase programme from the current pace of $85 billion per month. This could reduce global liquidity and risk

appetite. The announcement has already delayed two issuances from India, Canara Bank and Syndicate Bank, which in total were expected to raise $1.5 billion this week.