$6 billion in 2 weeks: India Inc bonds a big hit overseas

Indian companies raised $6 billion selling offshore bonds during January 1-14, the most in the first fortnight of a year, showing the confidence of international investors in India's economy despite looming uncertainties globally.

A mix of borrowers including Reliance Industries (RIL), State Bank of India, JSW Infrastructure, Shriram Transport Finance and India Clean Energy have also managed to tighten their funding cost by 30-35 basis points from initial projections, after getting bids several times the offer size. A basis point is 0.01%.

The Indian issues have received strong interest at a time when investors are mostly apathetic about other emerging markets, especially China.

"Emerging consensus is that India by and large is delinked from most EMs and does constitute a separate asset class," said Amrish P Baliga, managing director, Deutsche Bank India. "Indian issuers are viewed as quality credit with tightening yields reflecting the same."

Indian companies raised $6.03 billion during January 1-14, about three times more compared with $2.09 billion a year earlier, show data from Dealogic.


Benefitting from Portfolio Diversification
This is also more than a quarter of the $22 billion raised in the whole of 2021, which itself was a record.

"Globally, the bond market is weak amid looming uncertainties on account of monetary tightening and inflation concerns," said Pramod Kumar, managing director and head of investment banking at Barclays India. Indian companies are benefiting from this, as international investors are seeking diversification of portfolios through emerging markets, he said.

The US Federal Reserve's rate hike trajectory and the Evergrande episode in China have fuelled concern, which resulted in a weak global bond market.

Chinese real estate developer Country Garden Holdings reportedly had to cancel a $300 million bond sale last week due to lack of demand. That country's property sector has been hit hard by a series of defaults and missed loan repayments following the Evergrande crisis. Cash-strapped Chinese developers are negotiating new terms with bondholders to delay repayments. Evergrande secured such a crucial nod last Thursday.

"Interest rates continue to be around historic lows," said PD Singh, managing director and head of corporate banking at JP Morgan India. "Issuers have taken advantage of investors' renewed allocations for 2022 to tap the markets before the rate hike cycle commences," he said. "The strong economic recovery in India, coupled with a stable sovereign rating, has renewed investor interest in Indian paper." The US Treasury benchmark surged as much as 31 basis points this year to 1.795% on Friday, although it is far off its near-term high of 3.26% hit on October 9, 2018.

This year so far, JSW Infrastructure raised seven-year money offering 4.95%, 30 bps lower than the initial price guidance. This deal happened at a time when the Country Garden deal fizzled out.