Offshore bonds volumes from India are set to gather pace after a banner year as companies tap the lowest borrowing costs in a decade to pay for buying assets locally and abroad. That’s the view of Citigroup Inc., which forecasts sales of debt denominated in US dollar, euro and yen in 2018 to be as good as last year when issuance totaled $15.6 billion, the highest in three years. “Banks are talking with more companies now for acquisition and capex funding than in the past two to four years,” said Neville Fernandes, head of debt capital markets for India at Citigroup, the second-largest arranger for so-called G3 bonds locally in 2017. “Several companies are evaluating acquisitions with a wide range of objectives -- acquiring global market share and capacity, buying front-end distribution in growth markets, acquiring intellectual property or natural resources as commodity prices rise.” Indian firms have also become more ambitious globally. Hindalco Industries Ltd. made a non-binding offer through its US unit, Novelis Inc. for US aluminum maker Aleris Corp., people with knowledge of the matter said earlier this month. A deal could value Aleris at about $2.5 billion including debt, the people said, and likely help revive cross-border purchases by local firms from a eight-year low of $4.25 billion. The recent upgrade in India’s credit rating by Moody’s Investors Service has helped reduce costs. Spreads over Treasuries for Indian dollar bonds have fallen to 151 basis points, the lowest since 2007, according to ICE BofAML index data.
Still, India remains a small player in the G3 bonds market that’s dominated by Chinese firms, which raised an equivalent of $215 billion last year.“Global investors want more of India,” said Fernandes. “While liquidity continues to remain strong in emerging markets and rates have been low, the scarcity value attached to Indian bonds is extremely high.” Here are some highlights from his interview in Mumbai: