Below investment grade companies set to raise big dollars

The overseas market has generally been more receptive to highyield issuances this year."

Indian private sector companies, which are rated lower than investment grade, in the international market have made the most of low rates and easier liquidity conditions in the overseas market and are on course to raise a record amount of dollars.

So far this year, firms such as Azure Power, Jubilant Pharma, Greenko, Delhi International Airport Ltd (DIAL), GMR Hyderabad, Vedanta Resources and JSW Steel have cumulatively raised $7.4 billion and are just shy of beating the $7.7 billion raised by such companies in 2014. Bankers expect the 2014 record to be broken this year as more such companies like UP-based Lalitpur Power Generation are already meeting investors to find the time to issue these bonds.

“The overseas market has generally been more receptive to highyield issuances this year and Indian companies have taken full advantage of this fact,” said Sameer Gupta, head of debt capital markets at Deutsche Bank India. “This window has opened even as liquidity in the Indian markets was tight especially in the first half of the year, so it has helped companies access funds and also diversify their funding sources all at one go.”


The rush has been such that some companies have hit the overseas market twice this year to raise funds for refinancing and general corporate purposes. Take JSW Steel for example, which raised $400 million through a 5.5-year bond offering to international investors at 5.37 per cent on Tuesday. This was the alloy maker’s second such offering after raising $500 million in April this year. It is rated Ba2 by Moody’s and BB by Fitch.

Two of the GMR group’s airport subsidiaries — DIAL and GMR Hyderabad — raised $350 million and $300 million by selling these bonds to investors abroad. Then there are NBFCs like Indiabulls Housing Finance and Shriram Transport, which used this route to diversify their sources of funding. In February, Shriram Transport raised $400 million by selling three-year bonds to investors outside the US and followed it up with a $500-million issue for US-based investors in April.

“We are expecting more such high yield issuances out of India and we expect this year to be a record year, which will set the benchmark,” said Ashwini Kapila, managing director at Barclays. “The market has been really conducive driven by a clear risk on rally. The sharp fall in the US treasuries have also helped these companies and some of the concerns of last year like trade tensions between US and China have also subsided. All this has played its part.”
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