MUMBAI: Indian companies’ overseas dollar bond issuances have already surpassed last year’s total in just the first four months of the current year and is on the way to exceed 2017’s record helped by easier global liquidity and the Reserve Bank of India’s (RBI) liberal stance to allow new industries such as non-banking finance companies (NBFCs) to borrow from the overseas route.
So far till April this calendar year, Indian companies have raised $9.4 billion by selling dollar bonds led by diverse companies like State Bank of India ($1.25 billion), Shriram Transport Finance ($900 million), Vedanta ($1 billion) and Indian Oil ($900 million). This has already exceeded the $6.3-billion raised from the market last year and is on course to overtake the record $15.4-billion raised in 2017, bankers said.
“This momentum is likely to continue for the rest of the year because domestic liquidity is still tight and the markets here are not deep enough. There is every possibility that we may exceed $20 billion this year because conversations with potential issuers are still on going and we don’t see anything to impact them,” said Ashwini Kapila, managing director, Barclays India.
Bankers say easy liquidity overseas, benign interest rates and a relatively stable global macroeconomy will likely continue to attract Indian companies to raise dollar funds from abroad. This, along with the fact that the RBI earlier this year eased restrictions for firms, especially for NBFCs, sourcing funds abroad will continue to lead to issuances out of the country.
In January, RBI eased the ECB guidelines, which allowed all entities eligible to receive foreign direct investment (FDI) to borrow a minimum of $750 million per financial year under the framework without seeking permission from the regulator.
“I expect the market to hit at least $16 billion for 2019 which is about the levels seen in 2017. The only hitch is if there is risk off globally, which means investors think that the market has run off quite a lot it could lead to a rise in the dollar and take the US rates higher. The local election outcome is also a risk in terms of how it shapes up. But the market is currently very richly priced,” said Vijayan Subramani, head, treasury and markets, at DBS India.
India’s general election results are due on May 23 and market participants say a hung verdict could raise uncertainty about the future of economic reforms in the country. Also, the fact that so many Indian companies have already raised money from abroad increases the risk of oversupply.