Indian companies are witnessing a sharp spike in demand for their dollar bond offerings thus giving a respite from the ongoing liquidity issues in the local markets.
Statistics collated by BS Research Bureau shows that Indian companies raised $13.74 billion in the first 10 months of calendar 2019 as compared to $1.65 billion raised in the same period of last year. The energy and infrastructure companies are getting a good response from investors as their track record in debt repayment is far better than real estate and telecom companies from India, say bankers.
Indian Oil, Network i2i Ltd, Shriram Transport and Adani Port & SEZ Ltd and REC were among the top fund raisers in the current year (see chart). “Some of the Indian companies received better credit ratings than the Indian sovereign ratings – making it easier for Indian corporates to tap the overseas markets,” said a banker. These bonds are traded in the secondary market where sentiments on debt being repaid plays an important role in market price.
“Post launch of the bonds, these (energy and infrastructure) companies are trading at a good price thus giving confidence to both investors and companies to launch new paper,” said he. Adani Green raised 20-year old green bonds worth $363 million in October and received offers worth $2 billion.
With rising M&A activity, Indian companies are getting direct access to newer markets, and better technologies. This would enable them to increase their customer base and achieve a global reach. “The changing demographic landscape, constant improvement of product and offerings mix augur well for companies and ultimately India’s economy and foreign portfolio investors are betting big on its success,” said a banker who helped Indian companies to raise funds overseas.
Last week, IFR reported that the market price for bonds issued by one of Adani's Abbor Point Port Terminal’s 2022 bonds went up by 15 per cent since January this year to touch a record high. This was mainly due to a sharp swing in Australia’s political sentiment towards its coal coal project. This has fuelled investor confidence in the fixed rate bonds which have outperformed the bond market benchmarks in 2019, IFR reported.
"The global markets from an infrastructure company's perspective offers a much more friendlier and consistent terms than what the local market offers," said a banker. "Hence, the dollar bond rush."