Robust demand for India Inc's overseas bonds despite India-Pak tensions

The tension between India and Pakistan at the border has not dampened the demand for India Inc’s papers for overseas investors. 

With Fed Reserve of the United States indicating no rate hike in the near future, and Indian economy growing at a steady 6.5-7 per cent, global investors are looking at a window of opportunity of investing in India — considered safe among emerging markets in the world, say bankers and company officials. 

Despite the ongoing tension at the LoC, the credit default swaps of the Indian companies are steady and have not deteriorated. 

“The demand for dollar bonds from Indian companies is high because there is no other competing global market among emerging economies where investors can exercise their option. India is the safest bet and hence inherent demand for Indian papers is very strong,” said Prabal Banerjee, group finance director of Bajaj Group. 

At least six major companies — Jubilant Pharma, ReNew Power, IRFC, Canara Bank, NTPC and Kerala Infrastructure Investment Fund Board — are in the market to raise funds. Besides, Bajaj Finance, Piramal Capital and Finance and Hero Fincorp are also in talks to finalise bankers and lawyers for raising foreign exchange resources through dollar bonds, a senior banker with a multinational bank said. 

Banking sources said Jubilant Pharma Ltd (JPL) on Thursday launched five-year bonds to raise $200 million. The pricing is expected to be around 5.75 per cent. The money raised to prepay its convertible loan, working capital facilities and other indebtedness. 

JPL’s initial public offering is taking longer than it expected. In the meantime, the company is rationalising its higher interest costs borrowings. “The company is expected to achieve meaningful interest cost savings after the refinancing,” said a banker. 

“As far as rates are concerned, there have been moderate movements in structure but also in overall yields, which is good news for Indian borrowers,” said Banerjee. 

Bankers said with the financial year coming to an end by March, more companies are expected to launch dollar bonds in the next four weeks — mainly to reduce interest cost on their older loans. 

“Indian companies are doing extremely well and are making investments in the domestic market. The border tension is temporary and very few foreign investors have shown nervousness about it,” said a banker. 

In the 2018 calendar year, dollar bond issuance by Indian companies fell as exchange rate swung, and low appetite for Indian bonds kept such issuances subdued. 

While dollar bond issuance in 2017 was at $13.11 billion, it dropped to $6.09 billion in 2018. However, this didn’t mean that the Indian companies cut down on their fundraising significantly. 

They made good on their dollar funding to raise money from the domestic market. Bankers expect that the dollar bonds will rise in 2019 as corporate investment picks up pace after elections.