A U.S. one-hundred dollar banknote and Indian ten rupee banknotes are arranged for a photograph (Photographer: Dhiraj Singh/Bloomberg)

Green Shoots Appear in India's High-Yield Dollar Bond Market

(Bloomberg) -- India’s riskier borrowers have in recent years been almost entirely absent from the global dollar bond market, but there are signs that’s gradually changing after a loosening of issuance rules last year and a drop in financing costs in 2019.

Jubilant Pharma Ltd., a unit of India’s Jubilant Life Sciences Ltd., is seeking a U.S. dollar-denominated bond, in what would be at least the second high-yield note from the country this year. There was only one Indian dollar bond issued as a high-yield security in 2018.

What’s Changing

  • Indian regulators had restricted overseas issuance, but the central bank last year expanded the list of eligible borrowers who can raise funds internationally.
  • Average spreads for high-yield local companies have declined to 403 basis points over Treasuries, from a more than two-year high of 546 basis points touched on Jan. 3, according to ICE BofAML index data.
  • In the high-yield dollar bond pipeline from India, ReNew Power Ltd. has also hired banks to arrange investor meetings for a green note sale, which is expected to be rated below investment grade.

Deal Details

  • Jubilant mandated banks to arrange fixed-income investor meetings from Feb. 26 for a potential Regulation S dollar bond, according to a company statement.
  • The company is planning to return to the dollar bond markets, after issuing $300 million 4.875 percent notes in 2016, according to data compiled by Bloomberg.

Key Background

  • Jubilant would be at least the second high-yield dollar issuance from India this year, after lender Shriram Transport Finance raised $400 million earlier this month, the data show.
  • The broader Indian overseas market is also off to a strong start. Indian issuers sold a total of $3.7 billion of bonds overseas at the start of 2019, a record compared with similar periods in previous years. Except Shriram, all other issuers so far this year are rated investment-grade.

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