Led by Reliance Industries which is eyeing 10-year money, a clutch of firms including Power Finance Corporation, Rural Electrification Corporation, Indian Railway Finance Corporation and Lodha Developers could hit the dollar bond market soon, investment bankers aware of the development confirmed to FE. Last Friday, Moody’s upgraded India’s sovereign rating to Baa2 from Baa3, a move that’s expected to make dollar borrowings cheaper. Companies are hoping to be able to close out their fund-raising before the yields on US treasury yield rise. Given that corporate bonds are generally priced at a premium to the US treasury, it would translate into a higher cost of funds for borrowers.
The 10-year US bond yield has risen by 31 basis points since early September, to trade close to 2.34% on Monday evening. Various factors like a US Fed rate hike, the balance-sheet trimming programme and tax reforms are fuelling the upward trend. Lodha Developers is expected to raise $100 million, topping up an earlier issuance in 2015 when it raised $200 million at a coupon rate of 12%, sources indicated. Indian firms and banks have tapped the overseas bond markets for some $13 billion this year, more than the $11 billion they raised in 2016. Deal activity typically tapers off as the holiday season approaches but given the sovereign upgrade investors may be willing to work a little longer this year.
On Friday, the credit spreads for some Indian paper narrowed by 5-10 basis points. Arun Saigal, MD and head of financing, Barclays India, said longer-dated issuances from India should see a bigger appetite following the upgrade. Jayesh Mehta, MD and country treasurer, Bank of America, pointed out that the upgrade would make many more investors eligible to invest in Indian paper and that could drive down spreads.