Will SBI's bond plan help India Inc's comeback to the offshore market?

A planned bond sale by State Bank of India may help the nation’s borrowers decide whether the timing is right to return to the offshore market, which they’ve been shut out of amid an emerging-market rout.

India’s largest lender, which is seen by international investors as a proxy for the sovereign, started a roadshow on July 9 for a dollar-denominated green bond. No Indian company sold offshore notes last quarter, the first time that happened since 2009, as a selloff in emerging-market assets following rate increases from the US Federal Reserve damped investor appetite.

The going won’t be easy for Indian issuers. Yield premiums have jumped for their debt, and SBI itself has seen the spread on its 3.25 percent dollar bonds due 2022 climb 36 basis points so far this year, according to Bloomberg prices. Market sentiment toward Indian firms is weak even though the nation’s economy is doing well: it’s the fastest growing among the world’s major countries and Moody’s Investors Service upgraded the sovereign rating in November.

“The dollar bond market is quite vitiated, with credits looking to be sold off,” said Ajay Marwaha, director for investments at Sun Global Investments in London. “Global sentiment isn’t conducive for risks at the moment.”

The dearth of foreign-currency bond sales this year comes after such issuance jumped to a three-year high of $15.6 billion in 2017, according to data compiled by Bloomberg.

Some analysts question whether SBI’s bond sale will revive offshore issuance even if its deal is successful.

“SBI is considered a semi-sovereign, which may help this issue to sail through,” according to A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte in Singapore. SBI’s attempts are supported by lack of other issuers tapping the offshore markets, and that may also boost the chance of its success, he said.

Separately, SBI signed a $750 million three-year term loan with nine lenders, with no banks joining in the general syndication of the facility, according to people familiar with the matter.