Forex debt raising soars, touches $5.6 billion so far this year

Apr 13 2014, 18:14 IST
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In March, IDBI Bank raised USD 300 million at a coupon of 5.06 percent for a 5.5-year Reg S bond sale. (PTI) In March, IDBI Bank raised USD 300 million at a coupon of 5.06 percent for a 5.5-year Reg S bond sale. (PTI)
SummaryOverseas fund raising by domestic corporates had came to a near halt following the May 24, 2013 tapering talk by the US Fed.

As domestic interest rate is likely to remain elevated for some more time, corporates and banks are hitting the international debt market with renewed interest and have mopped up a hefty USD 5.6 billion so far this year.

Last year, India Inc raked in a whopping USD 16 billion, up 60 percent from 2012, through international debt market to meet their working capital needs as well as to retire high cost rupee debts.

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Leading the chart this year is State Bank of India, which last Friday sold bonds worth USD 1.25 billion in a dual tranche issue to international investors. This record sale was preceded by a USD 1-billion issue by the state-run Oil India, in its debut foreign bond sale last Tuesday.

Investment bankers attribute the rise in forex borrowing to the elevated debt servicing cost in the domestic market and skimpy margins due to the lingering economic slowdown, which has entered the third year now. And going by the large dollar mop-up this year so far, merchant bankers are of the view that 2104 may better the 2013 record.

As per investment bankers, close to USD 6 billion bond sales are in the pipeline before July from a clutch of big corporates like Bharti Airtel which is planning to raise USD 2 billion before July, OVL, IFCL etc.

Other issuers include Power Finance Corporation which is planning up to USD 700 million issue, Rural Electrification Corporation which is tapping a USD 1-billion issue, and IFCL which is eyeing close to USD 1.5 billion in forex bond sale.

ONGC Videsh is also planning a benchmark issue shortly to raise USD 500-700 million to fund its Mozambique oil and gas block acquisition. According to the company, the proceeds will be used to pre-pay a bridge loan of USD 2.2 billion it had raised earlier this year for the Mozambique oil blocks.

Overseas fund raising by domestic corporates had came to a near halt following the May 24, 2013 tapering talk by the US fed.

But investment bankers say that domestic firms can still save up to 5 percent in interest cost by raising forex debt in comparison to rupee loans, hence the renewed interest.

At present, the US treasury rate is in the realm of just about 2.75 per cent, while in the country it's nearly three-times higher.

Since the tapering talk in May and December, there were only

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