Indian Railway Finance Corp. is looking to raise the equivalent of $250 million in yen for 10 years, the company’s first syndicated Samurai loan since 1998, Managing Director S.K. Pattanayak said in an interview. NTPC Ltd., the nation’s largest power utility, is seeking $350 million-equivalent of the same maturity. This compares with an average tenor of six years on $846 million of yen loans signed by Indian borrowers last year, data compiled by Bloomberg show.
“Appetite remains strong for a quasi-sovereign borrower like the Indian Railway Finance, which operates with a risk-free business model,” Pattanayak said by phone from New Delhi. “Some Japanese banks met us and sounded positive. We’re expecting good responses” for the loan proposal, he said.
Japan’s negative interest rates are pushing the nation’s yield-starved lenders and insurers into emerging-market debt. For Indian companies seeking to raise funds in a wider range of currencies, the Samurai debt market offers among the world’s lowest funding costs. Average margins on yen loans of Indian firms were 47 basis points in 2017, compared with 157 for dollar borrowings, Bloomberg-compiled data show.
NTPC is marketing its $350-million to general syndication at a 95-basis point margin above the yen Libor rate, according to people familiar with the matter. The borrowing is the power generator’s first overseas syndicated facility since 2014, the data show.
“Only the large Japanese banks may have an appetite for these longer-tenor loans,” said Manmohan Singh, head of banking at the Indian unit of Bank of Nova Scotia. The market also isn’t open to everybody, according to Singh.
“Japanese lenders are very sensitive on ratings of borrowers, so the market may be open for only for the top Indian companies, including quasi-sovereigns,” he said.
In a sign that Japan is nowhere near ending its negative-rates policy, a Bank of Japan board member said Thursday the central bank should expand monetary stimulus to hit its 2 per cent inflation target.