Modi Win Revives India Bond Sales as Cost Drops to Year Low
Rupee bond sales by Indian companies are set to revive as borrowing costs have declined to the lowest in a year
(Bloomberg) -- After a dull start to the quarter, rupee bond sales by Indian companies are set to gather pace as borrowing costs have declined to the lowest in a year after Prime Minister Narendra Modi’s landslide victory.
Billionaire Kumar Mangalam Birla’s Grasim Industries Ltd. and UltraTech Cement Ltd. plan to raise a combined 7.5 billion rupees ($108 million) selling five-year bonds. State-owned NLC India Ltd. priced 14.75 billion rupees of debt -- its first issuance in a decade -- as average yield for 10-year AAA paper fell to 8.29% Tuesday, the cheapest since last May.
“Yields have come down and corporates waiting to refinance will borrow,” said Sandeep Bagla, associate director at Trust Group in Mumbai. “Issuance will pick up pace as clarity on the regime improves business sentiment.”
JSW Steel Ltd., the nation’s second-biggest producer, plans to raise 70 billion rupees via bonds and State Bank of India, the country’s largest lender, is considering raising as much as 50 billion rupees through notes on Wednesday, according to exchange filings.
Local-currency issuance in the three-month period that began April 1 is about 700 billion rupees, or 25% of the total raised in the March quarter, as companies held off fundraising during the six-week election process that ended May 19. Corporate bond sales in the year to March 2020 may be between 6.75 trillion rupees to 7 trillion rupees, up from 6.5 trillion rupees a year earlier, according to Care Ratings.
The potential for reforms after Modi’s comprehensive victory is likely to improve the flow of foreign capital to corporates, according to S&P Global Ratings. That’s good news for India’s credit markets, which have suffered from a crisis of confidence after shock defaults since last year by Infrastructure Leasing & Financial Services Ltd. and a string of downgrades at mortgage lender Dewan Housing Finance Corp. and Reliance Capital Ltd.
To contact the reporter on this story: Divya Patil in Mumbai at dpatil7@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ravil Shirodkar, Anto Antony
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