Indian companies have raised close to $19 billion in 2014 so far through overseas bond issuances, a record level. In 2013, the amount raised was $12.6 billion. Foreign investors have been encouraged to subscribe to Indian paper, thanks to a stable government at the Centre, attractive returns and ample liquidity available with them.
According to RBS, US dollar-denominated bonds saw maximum issuances at 72.9%, followed by bonds denominated in Singapore dollars (SGD) and Chinese renminbi (CNH) till November 2014. Manmohan Singh, MD and head of debt capital markets, India, RBS, said currencies like SGD and CNH have provided greater distribution and arbitrage opportunities for issuers.
Two high-yielding bond issuances from Reliance Communications and Lodha Developers had to be withdrawn earlier this month following a lack of demand from foreign investors. However, bankers remain confident of a change in investor outlook towards high-yielding bonds.
Chetan Joshi, head of debt capital markets, HSBC India, said: “We don’t believe its possible to generalise on the basis of the performance of specific trades, particularly in December when global investors are usually less active and market liquidity is low. The India high-yield story has only taken off in 2014 and, minor hiccups notwithstanding, we expect it to continue to grow.”
In July 2014, Rolta India had raised $300 million from five-year bonds at a coupon rate of 8.88%. Amit Bordia, MD & head, corporate finance, Deustche Bank India, said 2014 was characterised by the emergence of Indian high-yield debt with $5.5 billion worth of issuances across 13 bonds.
A possible cut in interest rates in India and chances of an increase in the US may reduce the attractiveness of Indian paper for investors. Bankers, however, say companies will nevertheless try and tap the offshore markets, especially those that need to use the funds abroad.
Till November this year, banks were the top offshore bond issuers at 41.2% of the total issuances in 2014, followed by real estate and oil & gas, each contributing 13.2% and 9.1%, respectively, according to an RBS report, which also stated that the investment-grade bonds contributed 85% of the total issuances in 2014. A Fitch report says issuances by non-investment grade (rated lower than ‘BBB-‘) corporates have increased to over $5 billion in 2014 from $3 billion in 2013. With the holiday season setting in and investor-activity subdued due to consolidation of books, companies may not venture out in the remaining two weeks of 2014.