Indian corporates are speeding to faucet the offshore bond market to lift debt with the market additionally opening as much as high-yield or junk bond issuers.
In simply over a month in 2021, Indian corporations have raised $3.3 billion by issuing bonds to abroad traders, confirmed knowledge from monetary markets knowledge supplier Refinitiv.
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Non-public corporations similar to Adani Ports and SEZ Ltd, Continuum Inexperienced Power Ltd and state-run entities similar to SBI, Export Import Financial institution of India and Energy Finance Corp. have mobilized funds via the offshore debt capital market this yr. Others similar to UltraTech Cement Ltd, ReNew Energy Pvt. Ltd and IRB Infrastructure Builders Ltd are additionally planning to make use of the route within the coming weeks.
“This yr has opened on a constructive word for the offshore bond market, with an oversubscribed bond issuance by Exim Financial institution adopted by different non-public and public gamers,” stated Ravi Dubey, a accomplice at regulation agency IndusLaw.
“From an issuer perspective, there’s a clear benefit of decrease rates of interest within the offshore bond market. Among the issuers are tapping the offshore bond market to repay their higher-priced loans. For others, these bonds present a further avenue for debt financing, particularly the place home lenders have hit their group limits,” he stated.
India Inc. started 2020 with a flurry of offshore bond gross sales however this got here to a halt resulting from covid which spooked the debt capital market, making it dearer for corporations to lift capital. Nonetheless, they managed to lift $13.9 billion in 2020, although the quantity was considerably decrease than the $21.4 billion raised in 2019, knowledge confirmed.
In line with trade consultants, whereas the pandemic had made it tough for lower-rated corporations or so-called high-yield issuers, the market has opened up for such issuers too in latest months.
“Essentially, what you may have is a market which was till no longer open for crossover or high-yield sort of issuers. The market has now opened for these issuers. Therefore, individuals are actually trying to reap the benefits of this chance,” stated Shantanu Sahai, managing director and head of debt at Nomura India.
“Proper now, we’re seeing a really distinct flavour within the set of firms which might be tapping the market. There are a bunch of renewable or ESG-related firms which might be going out and issuing bonds. The second class which is now turning into lively is manufacturing sector firms,” he stated.
IndusLaw’s Dubey stated main gamers within the banking and finance sector will proceed to faucet the offshore bond markets, notably in gentle of price range bulletins.
To make sure, whereas borrowing prices are decrease abroad, the differential might not be a lot as soon as all prices of offshore borrowing are thought of, particularly for lower-rated firms.
“Whereas borrowing prices are low abroad, for lots of the issuers it’s not essentially cheaper in comparison with charges in India. On the margins, it’s most likely dearer to difficulty offshore, as a result of whenever you add the withholding tax, hedging prices, score and itemizing prices, in mixture, the price comes out to be a bit of dearer than in India,” stated Sahai. “However it’s a great way for firms to diversify their sources of funds.”