Borrowing by India Inc, others from abroad hits $12 bn mark, may ink new record in 2017

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New Delhi | Published: September 7, 2017 6:19:12 AM

Borrowings by Indian companies and banks from the overseas markets are tipped to hit new highs in 2017 with a record $12 billion already having been raised so far. Appetite for Indian paper remains strong, allowing borrowers to pick up money at very fine rates.

 India Inc, HSBC India, ICICI BankIn 2014, ICICI Bank priced its dollar bonds for a tenure of five and a half years at a spread of 180 basis points over the US Treasury yield. (FE Photo)

Borrowings by Indian companies and banks from the overseas markets are tipped to hit new highs in 2017 with a record $12 billion already having been raised so far. Appetite for Indian paper remains strong, allowing borrowers to pick up money at very fine rates.

“Spreads for Indian borrowers have tightened more than those in other countries thanks to the strong macro fundamentals,” Hitendra Dave, head, (global banking and markets), HSBC India, told FE. Dave points out that the abundance of liquidity globally and the limited supply of paper from India are among the reasons for the record mop-up from overseas markets. “Most investors such as insurance funds, debt funds or retirement funds are Asia-based,” he said.

Indeed, spreads have now contracted by about 100 basis points over the past couple of years. Among those in the market for an issuance over the next three months, investment bankers say, are State Bank of India and ICICI Bank. The lenders are believed to be looking at a raise of $500 million via dollar-denominated bonds with a tenure five years.

In 2014, ICICI Bank priced its dollar bonds for a tenure of five and a half years at a spread of 180 basis points over the US Treasury yield. Three years down the line, in March 2017, the lender was able to pick up $300 million at just 135 basis points over the US Treasury yield.

Given the spreads on these bonds have fallen to 128-130 basis points in the secondary market, ICICI Bank could logically price its forthcoming issuance at these levels.

Meanwhile, SBI which has an approval to raise $1.5 billion, will pace the issuance over the next few months, investment bankers said. In 2014 the bank had raised $750 million in dollar bonds with a five-year maturity. The spread at the time was 205 basis points over the US Treasury yield.

In January this year, the lender paid just 145 basis points spread over the US Treasury yield for bonds of a similar tenure. These bonds are currently trading at a spread close to 128 basis points, according to data from Bloomberg. Arun Saigal, MD (global finance), Barclays India, told FE recently that spreads on Indian paper could decline given the good appetite.

Meanwhile, a couple of companies are waiting to issue masala bonds, the limits for which have been exhausted. The Indian Renewable Energy Development Agency is one candidate looking to raise $300 million. The firm might hit the market in September, investment banking sources said. The Securities and Exchange Board of India has halted issuance of masala bonds till foreign portfolio investors’ utilisation of investment limits in corporate debt falls below 92%.

ICICI Bank and IREDA did not immediately respond to queries while SBI did not provide any clarification regarding the issuance.

Investment banking sources have confirmed that Bank of Baroda will wait a while before hitting the market.

Two other firms — a Future Group company and a firm called Hero Future Energies which is into clean energy — were also believed to be exploring options to hit the overseas debt market, according to bankers.

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