Indian rupee and U.S. dollar banknotes (Photographer: Dhiraj Singh/Bloomberg)

India Dollar Bond Party Just Starting on Decade-Low Costs

(Bloomberg) -- Dollar bond issuance from Indian companies looks set to accelerate in the New Year off a 2017 record as issuers cash in on bullish investor sentiment and the lowest borrowing costs in a decade.

Dollar-denominated bond sales from India soared almost 90 percent to an all-time high of $15.2 billion in 2017, Bloomberg-compiled data show. Historically low interest rates and credit spreads have allowed some of the nation’s best-rated companies to access markets at very competitive pricing, according to Bank of America Merrill Lynch. Strong investor appetite internationally will spur further gains in 2018, according to Jay Capital Ltd.

“Investors are ready to lap up India paper,” said Asit Bhatia, managing director for global corporate and investment banking at the Indian unit of Bank of America Merrill Lynch in a phone interview. “There is a dearth of good Indian paper in the dollar bond markets.”

Moody’s Investors Service raised India’s sovereign rating for the first time since 2004 in November, amid brightening prospects for the country following a raft of policy changes by Prime Minister Narendra Modi. Since then, order books for Indian dollar notes have swelled, and the rupee’s march toward its first annual gain in seven years against the greenback is further bolstering confidence among companies tapping the dollar bond market, Bhatia said.

ICICI Bank Ltd. garnered more than $850 million of orders for a $500 million 10-year bond issued this month, while Reliance Industries Ltd’s $800 million offering in November was oversubscribed more than 1.6 times the issue size, people familiar with the matter said.

Spreads over Treasuries for Indian dollar bonds fell to 169 basis points last week, the lowest since 2007, according to ICE BofAML index data.

Tata Steel Ltd. has sounded out banks about raising the equivalent of $5.1 billion through loan facilities and a bond issue to help refinance debt, according to people familiar with the matter.

Strong Demand

“There is a lot of demand for Indian bonds from international investors, especially in the five-year tenor,” said Raj Kothari, London-based head of trading at Jay Capital in a phone interview.

India’s economic growth is expected to rebound to 7.5 percent in the year through March 2019, from an estimated 6.7 percent this year on the back of higher private consumption and investment demand, according to the median of 32 forecasters surveyed by the Reserve Bank of India.

“We see the investments picking up, which would require more capital raising from companies in 2018,” according to Manmohan Singh, head of banking at the Indian unit of Bank of Nova Scotia.

The first quarter of 2018 may be particularly strong for dollar issuance from India, according to S&P Global Ratings analyst Abhishek Dangra, who sees new issuers from the utilities sector and additional offerings by existing borrowers underpinning sales in the New Year.

“Based on the pipeline of new ratings and market news, it seems USD bond issuance from India is going to remain buoyant,” he said.

©2017 Bloomberg L.P.

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