Companies in bid to raise record sums from offshore bonds



India companies are set to raise a record amount of capital in the offshore debt market, beating their pre-pandemic high, as foreign investors, looking to rebalance their portfolios, chase their bonds.

With bond yields at a historical low, fundraising activity in the offshore bond market is on its way to surpassing the $21 billion record set in 2019. This year, Indian companies have raised as much as $19 billion, according to data from Dealogic.

Companies such as Tata Motors Ltd, HDFC Bank Ltd, and Axis Bank Ltd have raised global bonds this year at the cheapest rates for their respective credit ratings, compared with similar-rated companies in the Asia Pacific region or even globally.

“Right now, it’s a sweet spot in the global debt capital markets (DCM). The kind of reception investors are giving to Indian issuances is why a few of the recent transactions achieved record-breaking competitive pricing. TML Holdings Pte Ltd (a wholly owned unit of Tata Motors) did a $450 million Reg S only bond in June 2021, and the pricing for it was the tightest ever yield that any issuer in that rating category had achieved in the entire Asia-Pacific history of bond markets,” said Bhavik Pandya, head, South and South-East Asia DCM, Bank of America.

“A similar theme played out in the case of HDFC Bank on their $1 billion AT1 bond issuance, where they attracted a 3.7% coupon, which was the tightest ever pricing for a bank AT1 instrument in that rating category globally. Similarly, for the Axis Bank AT1 bond issuance, they got the tightest yield globally for their rating category,” Pandya added.

These transactions demonstrate that investors are willing to buy India exposure at prices they will not offer to any other market. “There is a big positive shift in investor appetite towards India underpinned by investors looking at alternatives as they realign portfolios. They are finding a safe haven in quality credits from India,” he said.

Investor appetite for Indian companies’ bonds has also attracted many first-time issuers to the market, including cash-rich technology companies.

“We’ve seen a boom of debut/inaugural offshore bond issuances from India. Wipro Ltd and HCL Technologies Ltd were debut bonds done in 2021, which got exceptional pricing. That is again a testament to the fact that global investors are very comfortable buying quality issuances from India,” said Pandya.

The strong demand is also allowing Indian companies to raise longer tenure debt with maturity of as much as 10 to 20 years in some cases.

“In current interest rate environment, investors are willing to extend the duration of portfolio while wanting to retain exposure to top quality credits. This theme is visible with a number of longer dated instruments that have been priced including inaugural 20-year tranche from Adani Ports and SEZ which was highly oversubscribed. Investors are comfortable with the credit quality of Indian issuers and in search for higher yields, are willing to invest in longer dated fixed rate instruments, offering issuers an exceptional opportunity to lock-in long term rates,” said Pandya.

Another major theme that’s driving the Indian bond offerings is the focus on ESG (environment, social and governance).

“We expect to see more activity in the offshore bonds market as Indian companies continue to take advantage of favorable market conditions. Beyond diversification from India’s domestic bond markets, sustainability-themed targets emerged as a significant key driver that could potentially continue to push forth activity. ESG-related bond issuance in the offshore dollar debt markets by Indian companies raised US$6.6 billion, almost 40% of the Indian US-dollar denominated bond proceeds so far this year. Indian companies are anticipated to tap into the growing pool of capital from investors tracking environmental, social and governance factors,” said Elaine Tan, Senior Analyst, Deals Intelligence at Refinitiv, a financial markets tracker.

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