PSUs rush to raise offshore debt for ongoing projects, retiring older loans

REC to raise $1.1 bn, NTPC and IRFC are raising $1.75 bn; Private sector companies led by Reliance Industries are also tapping international bond markets to raise funds

State-owned REC, NTPC and Indian Railway Finance Corporation (IRFC) are tapping the international markets to raise debt for their ongoing projects and retire old debts.

While NTPC plans to raise $750 million by January-end, REC plans is eyeing around $1.1 billion and IRFC $1 billion, as overseas lenders open their purse for these units, say bankers.

Lower interest rates and good appetite for Indian papers are the main reasons why foreign lenders are pouring money into Indian companies.

Private sector companies are also tapping into international bond markets to raise funds. RIL was the first to raise close to $4 billion by selling bonds to international investors. Renew Power and JSW Infrastructure also raised funds from abroad in recent weeks.

In the coming months, banks expect more companies including Vedanta, Jindal Steel, Adani Green Energy and Mumbai airport to raise funds from international investors. “We are expecting Indian companies to raise close to $10 billion in the first quarter of calendar 2022 and at least $25 billion-$30 billion by the end of the year,” said a banker, who did not wish to be quoted.

Top Indian companies are increasingly tapping global markets to replace their high-cost loans in India.  Bankers said that after the default by Chinese property giant Evergrande Group, there is an increased interest for Indian papers, as they are now considered as low risk.

“Top rated Indian companies–especially from the Indian government sector–do not carry any default risk and hence several international banks want to invest in the sector,” said a banker, asking not to be quoted.