Psus, Corporates Planning $2b Long-Term Ecbs

Several public sector undertakings and corporates are planning to raise nearly $2 billion though external commercial borrowings over 10-year maturity during the current financial year.

This follows announcement of fresh ECB guidelines under which overseas debt flotations over 10 years maturity were freed from the countrys annual ECB cap of US $ 8.5 billion. Such debt flotations have also been freed from end-use curbs and no longer require permission from the finance ministry.

Foreign investors, especially the qualified institutional buyers (QIB), are now vying to have an exposure to long-term instruments with maturity profile of 10 to 20 years which will now top the issuers list.

 

Instruments would be structured as per the prevailing market conditions and investor preferences like the floating rate notes (FRNs) and plain vanilla bonds. The ECBs will essentially be bonds and not global depository receipts (GDR) as the latter cannot be rated.

Pricing of the instrument would depend on the ratings of individual companies and the prevailing market conditions. However, in the near future, Indian paper will be able to raise funds at an interest rate band of 120 to 160 basis points over US treasury bills for a 10-year tenure. Interest rates on 20-year paper would be between 225 and 300 basis points over US treasury bill rate, Mark Coombs, chief of global capital markets of ANZ Investment Bank, said.

Project finance is mostly leveraged towards ECBs because of lower international interest rates. However, the ECB market is restricted to 40 to 50 Indian companies, said Coombs.

Coombs, said the sector-specific public enterprises, like the ones in oil and power sectors, had good scope to raise debt at a 10 to 20 year maturity window

ANZ, a leading offshore fund arranger, thinks that forthe current financial year, the Indian PSUs, financial institutions and corporates can raise up to nearly $2 billion from US investors,, he said.

The appetitte of American investors depended on the credit rating of the company and the prevailing price, he said adding that the Navaratnas stood a very good chance to raise long-term debt.

Among major borrowers who have lined up commercial debt offering through the ECB route are three Indian financial institutions: Industrial Development Bank of India (IDBI) , Industrial Credit and Investment Corporation of India (ICICI) and Industrial and Finance Corporation of India (IFCI).

Besides, the navaratna public sector undertakings and specialised blue chip companies like the Larsen and Toubro, Tata Electric and Konkan Railway Finance Corporation are also raising ECBs.

ANZIB, the investment banking arm of ANZ Grindlays Bank, is aiming to grab nearly $ 1.7 billion slice of the ECB cake. ANZIB has already arranged ECBs amounting to $ 400 million during the first quarter of the current financial year. Hence, our target of $1.7 billion is achievable by the year end said Rana Kapoor, general manager, ANZIB.

ANZIB looks upon India as key franchise territory, moreover we are fully geared to provide our client base with value added investment banking range products and services, said Kapoor.