Indian companies have mopped up over $10 billion from overseas bonds — most of it in dollars and some in euros — so far in 2014. Given appetite for Indian paper remains strong, investment bankers are convinced another $6-7 billion can easily be raised.
With interest rates in the country elevated, corporates have been looking to raise funds overseas. Earlier this month ONGC Videsh raised $2.23 billion through dual-currency foreign bonds across three tenures, the largest offshore issue this year. The five-year US dollar bond was priced at 160 basis points (bps) over benchmark US treasury; when ONGC last raised such bonds in April 2013, these were priced at 190 bps over treasury.
Tata Steel may borrow close to $3.2 billion soon through a combination of loans and bonds — dollar- and euro-denominated senior unsecured notes — Bloomberg reported on Monday. Bankers close to the transaction confirmed to FE the company is going on a roadshow to meet investors in Hong Kong, Singapore and London. “The company has not zeroed in on how much it wants to raise or the formats and currencies through which borrowings will be made,” bankers said. Bloomberg, citing sources, said Tata Steel will hire arrangers this week to facilitate a loan borrowing in dollars, euros and pounds.
Spreads on Indian paper have contracted to their lowest levels since 2007, tightening by about 100-150 bps over the last eight months. ICICI Bank raised $250 million at 185 basis points over five-year US treasury, the tightest spread ever since 2007.
Most borrowings are being made to refinance costlier foreign exchange loans — in Tata Steel’s case it had borrowed to finance the takeover of the Anglo-Dutch steelmaker Corus. Since the cost of hedging hasn’t really come down, bankers say it doesn’t make sense to bring back the money.
Bloomberg reported that Tata Steel poised to be the fourth Indian borrower this year to sell euro notes, up from just one for the whole of 2013, according to data compiled by Bloomberg.
The agency said euro-denominated bond sales in Asia outside Japan in the second quarter grew by more than eight times to 2.1 billion euros from 250 million euros in the three months prior. Tata Steel’s last dollar-denominated note was a $547-million convertible bond issued in 2009; the firm has never sold a non-convertible dollar bond or euro security.