Opportunity for issuers to raise offshore funding: Manmohan Singh, RBS

Written by Aparna Iyer | Updated: Sep 24 2014, 06:58am hrs
With credit spreads at their lowest in seven years, many Indian companies could venture into the offshore bond market to raise dollar bonds, says Manmohan Singh, head, debt capital markets, India & Southeast Asia, RBS. Indian companies have raised over $14 billion through the offshore bond market so far in 2014, show data from Bloomberg. In an interview with Aparna Iyer, Singh said that, in 2014, offshore bond issuances could well rise to $20 billion.

Excerpts:

With current low spreads, do you see a strong issuance line-up from India continuing in the offshore market

Spreads of Indian companies are the lowest in many years and it is a great opportunity for issuers to raise offshore funding. The withholding tax on bonds has also been equalised with offshore loans. With this kind of environment, we can see more and more issuers coming into the market. We are very positive that we could see many debut issuances.

Will these low spreads sustain

These spread levels seem to be sustaining for the next few months since we do not see any negative surprises going ahead. The spreads are likely to be stable, but may not tighten further.

Do the low spreads make it easier for low rated companies to raise funds

Today's market does allow companies with non-investment grade rating to access the market within the ECB pricing ceiling of Libor plus 500 basis points. With tightening of spreads, we can see some non-investment grade companies also accessing offshore bond markets.

How does India stack up against emerging market peers

Different countries have different ratings and, thus, different pricing curves. Indonesia is perhaps closer to India in terms of the rating (same ratings by Moody's and Fitch). Indonesia sovereign is a regular issuer and has a well-established sovereign pricing curve. India hasnt issued sovereign bonds and the investors build pricing on the basis of state-owned entities that have issued offshore bonds. In the last few months, Indian offshore bond spreads have tightened more than the Asia Itraxx, which indicates outperformance in Asian market.

Is the investor base increasing for Indian paper

As we see more and more issuers coming in, we also see a few new investors coming into the market. This is a natural progression of emerging markets.

Is the pricing limit of Libor plus 500 bps restrictive

In the overall context of the size of total offshore borrowing by Indian companies, we dont believe that this is restrictive. The RBI has been very practical in looking at various aspects of ECB eligibility for Indian companies.