Firms, banks raise over $5 bn in 2015 via foreign bonds

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Updated: May 01, 2015 5:30 AM

On Wednesday, Bharat Petroleum Corporation (BPCL) had raised $500 million through 10-year bond issue while on Tuesday, Bank of India had raised $750 million through bonds with a maturity period of five years.

Indian companies have raised over $5 billion via offshore bonds in 2015 with $1.55 billion raised from three issuances in just three days starting Monday.

Shankar Subramaniam, MD and head, FI, corporate banking, at Bank of America believes there is a further room for tapping the bond markets overseas. “Secondary market yields remain attractive. Moreover, the subscription size and the aftermarket performance of some of the recent issues reflect interest shown by the foreign investors,” said Subramaniam.

On Wednesday, Bharat Petroleum Corporation (BPCL) had raised $500 million through 10-year bond issue while on Tuesday, Bank of India had raised $750 million through bonds with a maturity period of five years. Reliance Communications had raised $300 million through its bond issue maturing in 5.5 years, on Monday.


Bond arrangers say most issues have attracted robust interest from the investors. Experts are optimistic of the continued investor interest in the Indian papers in overseas markets. The largest issue of the year, in terms of size, was by Reliance Industries. It launched a $1-billion bond issuance in January. It then tapped the overseas market for the second time in February raising $750 million. Of $5 billion raised by companies in overseas markets, RIL alone raised $1.75 billion in 2015.

Exim Bank had raised $1 dollar through two separate issues of $500 million each this year. Both issues were priced at a coupon rate of 2.75%.

“If you look at the credit-default swap as one of the indicators of the investor sentiment towards Indian bonds, there hasn’t been a major shift over a period of time. But you can say they are at a comfortable level, which shows that the appetite for Indian papers are reasonably high,” said Vijayan Subramani, the managing director, treasury and markets, India at DBS bank.

Some of the high-yield issues which were put off last year were completed in 2015. Lodha Developers had raised $200 million at a coupon rate of 12% while Reliance Communications raised $300 million at a coupon rate of 6.5%.
Subramani of DBS Bank explains the Indian high-yield paper is a story paper and as long as one is able to communicate the opportunities and the risk with transparency, one would be able to see more success on this front.

Apart from the major issues, several banks raised amounts to the tune of $20 million each through offshore bonds. Barring one issuance which was in the Chinese Yuan, all the overseas bond issues in 2015 were dollar-denominated, according to bloomberg data.

However, certain trends like the return of Singapore dollar denominated issuances are likely to make a comeback this year after remaining absent in 2014 due to unattractive arbitrage. “Everything depends on the swapping cost. If the cost of swapping the funds raised in a particular currency is lesser than the cost in India or directly in the US dollar, I think you may see some non-dollar denominated bond issues,” said Subramaniam.

Foreign bankers are of the view that raising money through overseas bond market is more attractive than raising funds from the offshore loan route since there is a cost difference of at least 20 to 30 bps. Bankers are optimistic about overseas issuances from Indian companies crossing the $20 billion this year. Last year had seen a record figure of $18.6 billion.

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