Russian invasion of Ukraine: Indian firms put dollar bond plans on hold

$6 bn raised so far in 2022; next few months will be quiet, say market participants

With the international markets facing uncertainty after Russia invaded Ukraine and Western nations retaliated with sanctions, Indian companies are putting their international fundraising plans on hold as they wait for the markets to recover.

Bankers said apart from the geopolitical crisis, international rates are hardening in anticipation of interest rate hikes by the US Federal Reserve to control rising prices in the US.

The Ukraine situation has implications for the market. In such a situation, international investors try to shift to safe haven assets by exiting from emerging markets. This reduces liquidity in those markets to some extent, said A K Tewari, managing director of the State Bank of India.

The overall rate has risen with benchmarks going up because of the US Fed’s expected hikes and the mark up due to reduced liquidity and increased uncertainty. The players are thus likely to turn cautious in the near term, Tewari said.

Several Indian companies, including oil companies, JSW and Mumbai airport, were planning to tap the international oil markets and bankers said they are now watching the Ukraine situation before taking a decision. “If there is any breakthrough in the
talks between Russia and Ukraine, the market would bounce back as highly-rated Indian companies have a good track record of repayment,” said a banker.

Led by Reliance Industries, Indian companies have raised $6 billion year-to-date via dollar bonds. In calendar 2021, they had raised a record $23.3 billion. Bankers said some Indian companies received a better credit rating than the Indian sovereign – making it easier to tap foreign markets.

“These bonds are traded in the secondary market where sentiments on debt being repaid play an important role in market price,” said another banker, asking not to be quoted.

Ganeshan Murugaiyan, head of corporate coverage and advisory, BNP Paribas India, said at the start of year the market was quite favourable and many Indian companies raised substantial amounts from foreign debt markets.

Now, yields have risen and markets are volatile. And, there is the expectation of four-five hikes in policy rates by the US Fed. In light of this, Indian companies will wait for stability to return. Hence, the next few months are likely to be quiet, he said.

As for the loan market, Murugaiyan said it is stable so far. Many large Indian companies and groups have deleveraged and their debt-to-equity ratios are low. For good quality borrowers, money will be available at attractive rates.