Indian Railway Finance Corporation— the finance arm of Indian Railways — and ONGC are understood to be exploring the dollar bond market to raise $1 billion each, persons familiar with the matter told FE. “IRFC is looking to issue a 10-year paper to pick up close to a billion dollars. It is too early to say but we believe that a pricing of 160-165 basis points over the 10-year US Treasury yield may be possible in the current environment,” the persons said.
The ten-year US Treasury yield has fallen significantly since the end of November 2018, plunging by 178 bps to 1.45%. This is good news for the high rated bond issuers out of India.
The IRFC issue is likely to be a “144A/Reg S” one so that US investors can participate along with investors from other regions, the persons said. In March, IRFC raised $500 million and the 5-year paper was priced at 150 bps over the corresponding US treasury yield. The issuance received over $1.2 billion worth of bids, according to Bloomberg.
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Oil explorer ONGC is also believed to have held talks with bankers to explore the possibility of a dollar bond issue, bankers said. The firm is also looking to raise $1 billion through a 5-year paper. Bond investors evaluate a firm’s secondary market spread before investing in a fresh bond issued by them. It may be good news for IRFC that spreads on its 5-year dollar paper issued in March have come down to 137 bps. The firm is also set to sign a 7-year Yen Samurai loan of Rs 3,285 crore this week, according to Bloomberg. Emails sent to IRFC and ONGC remained unanswered till the time of going to press.