Power Grid Corp of India (PGCIL), the third Indian company to scout for overseas funds, raised $500 million through a 10-year dollar denominated bond sale at a price lower than bonds issued by Exim Bank earlier.
PGCIL priced its issue at 210 basis points over the benchmark US treasury — trading around 1.88%— to yield 3.98% and attracted subscription worth $9.54 billion from 354 accounts. Exim Bank had got a price of 220 bps over the US treasury and had got subscriptions worth $6.4 billion from 263 investors across the world earlier in the week.
The pricing for Indian paper has improved considerably since July, 2012 when SBI had raised five year money at 375 basis points above US treasury, then at around 1.5117%. Investment bankers said that being a government-backed power supplier company made it easier for PGCIL to get a better pricing than its peers from overseas investors.
Following Power Grid’s issue, funds raised by Indian companies through foreign currency bonds have totalled a whopping $1.45 billion in just under a week, which includes SGD250 million (about $250 million) 7-year Singapore-dollar denominated bond issued by ICICI Bank.
Funds raised by PGCIL is expected to be used to finance R20,000 crore capital expenditure plan for the year 2012-13. The lowering of the withholding tax to 5% from the earlier 20% has made it affordable for borrowers to bring the funds to finance their Indian operations and could result in a lot more companies using the overseas route this year.
Companies like India Infrastructure Company, Indian Oil Corporation, Power Financing Corp, Rural Electrification Corp and large nationalised banks could also hit market in next few months, according to investment bankers.