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Indian companies make hay as China stays away from bond markets

In past two weeks, companies that had lined up $1.55b of issues received bids for about $11b.

, ET Bureau|
Last Updated: Feb 14, 2020, 07.59 AM IST
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In the past two weeks, Indian companies that had lined up $1.55 billion of issues received bids for about $11 billion.
Indian companies selling dollar bonds are getting good rates — largely because the respiratory epidemic in China has limited the competition for funds from across the Great Wall.

In the past two weeks, Indian companies that had lined up $1.55 billion of issues received bids for about $11 billion.

“China accounts for nearly 70 per cent of Asian issuances,” said Shashank Joshi, head of corporate banking, MUFG Bank. “With supplies from the country disrupted, there is disproportionately higher interest in Indian papers offshore.”

Bharti Airtel, IIFL Finance, and government-back Indian Railways Finance Corporation (IRFC) were some of the issuers lately. Investment bankers say that demand for Indian debt may last until Chinese companies are back in the market. High demand is also helping Indian companies reduce funding costs.

Bharti Airtel raised $250 million for which it had obtained bids of about $1.5 billion. These perpetual bonds yielded at least 15 basis points lower than in the earlier series.

“The China crisis has created an opportunity for Indian issuers raising money overseas,” said Umesh Revankar, managing director at Shriram Transport Finance. “But, we need to play the cards well since overseas investors prefer niche business models.”

Shriram Transport would continue to explore offshore bond sales next fiscal year subject to comparative funding costs as the company believes that domestic offerings have increasingly become attractive due to adequate liquidity in the system.

IIFL Finance bonds also yielded 5.95 per cent, 25 basis points lower than the initial guidance. It raised $400 million from $300 million planned initially after the non-banking finance company witnessed demand exceeding five times the quantum of bonds on offer.

“We obtained subscription demand significantly more than our expectations,” said Nirmal Jain, founder and chairman of IIFL group. “It seems investors looking for high-yield opportunities have adequate liquidity. Traditionally, Chinese companies are large issuers of high-yield bonds. I guess supplies from China would have ebbed and opportunities from India are rising.”

IRFC sought to raise $1 billion, for which it received record bids exceeding $8 billion. “With economic activity in China slowing sharply on account of the virus, demand for funds has tapered, even as investors seek safe havens,” said Ananth Narayan, associate professor of finance at SP Jain Institute of Management and Research. “In this context, there is good demand for high-quality issuances from India.”
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