Indian Oil Corp raises $500 mn

First global offering by an Indian company in two months

Indian Oil Corporation (IOC) on Tuesday raised $500 million (Rs 3,000 crore) through 10-year bonds from international investors, paving the way for other prospective Indian issuers to follow suit. It was the first international offering by an Indian company in the two months since the beginning of a sharp slide in the value of the rupee against the dollar and intense volatility in the foreign exchange market.

The coupon (interest rate) for paper issued by government-owned oil refiner and marketing unit was 5.8 per cent per annum.

Its spread is 332 basis points above the yield on US treasury. The coupon is close to the yield on the IOC's paper trading in the secondary market.

Deutsche Bank, HSBC and Standard Chartered Bank were joint runners for the offering.

David Greenbaum, head of Debt Capital Markets (South East Asia) at Deutsche Bank said, "As one of India's most admired companies, Indian Oil was a natural choice to re-open the US Dollar bond markets after a two-month hiatus for Indian borrowers."

Indian Oil's bold and successful decision to move forward would convince other Indian issuers to act quickly while the window is open and the backdrop is stable, he said.

IOC officials did not respond to calls made to elicit comments on the development.

Bank executives said the yield on bonds and treasuries have hardened in the international markets after the US Federal Reserve began to indicate a gradual tapering (winding down) of bond buying activity.

Booking was in the excess of $ 3.6 billion from 338 investors, said an executive associated with the offering.

"A high degree of investor familiarity clearly supported this offering, but investors also gained comfort from IOC's strong operating track record and role as India's flagship oil company," said Randhir Singh, head, financing, Deutsche Bank (India).