Indian firms’ dollar bond issuance hits 14-yr low amid global yield pressures

By Bhakti Tambe and Jaspreet Kalra

MUMBAI (Reuters) – Indian companies’ fundraising via dollar bonds hit a 14-year low in 2023, as elevated global yields discouraged borrowers who moved to securing foreign currency loans instead.

Corporates have raised $4.1 bln via six dollar bond issues so far in 2023, according to data shared by LSEG Workspace, marking the lowest since 2009, when annual fundraising totalled $1.6 bln.

“Throughout 2023 global interest rate environment was not favourable and the cost of raising dollars hedged into rupees was comparatively higher than (accessing) domestic liquidity, so Indian issuers chose to borrow locally,” said Sameer Gupta, head of India and South East Asia debt capital market at Deutsche Bank.

Multiple rate hikes by the U.S. Federal Reserve and anticipation of prolonged higher rates drove an increase in bond yields worldwide.

Instead, Indian companies leaned on foreign currency loans, which are benchmarked to floating interest rates. The total borrowings reached $22.13 billion, the highest since 2014, according to data.

Apart from loans denominated in U.S. dollars, Indian firms have availed $2.15 billion in yen-denominated loans so far this year, up from $643 million last year, Refinitiv data shows.

Corporates are happy to do a loan which is a floating rate instrument, said Shoaib Ahmed, director of debt capital markets at ANZ.

Reliance Industries was among the largest borrowers in the foreign currency loan market this year, having raised over $8.5 billion as of October, data showed.

Lenders, including REC, Canara Bank and Shriram Finance raised foreign currency debt, with others like the State Bank of India exploring plans to raise funds early next year, according to multiple bankers.

Companies like Adani Ports and SEZ have sought to reduce their overseas debt by repurchasing their existing dollar notes.

“We have also seen that companies have bought back bonds, using money raised in INR market, effectively substituting some of the debt with cheaper or retiring debt,” ANZ’s Ahmed said.

Bankers expect an increase in dollar bond issuance in 2024 as global bond yields ease, with the volume of foreign currency loans likely declining.

Though there have been enquiries from corporates for tapping the dollar bond market in the coming quarter, actual volumes would only rise in the second or third quarter of 2024, Ahmed added.

Companies like REC and Exim Bank are expected to tap the market with dollar bond offerings, according to merchant bankers.

The companies did not immediately respond to Reuters’ email seeking comments.

“Historically it has always been a cycle … We have always seen this trend between either the loan market being more active or the bond market,” Ahmed said.

(Reporting by Bhakti Tambe and Jaspreet Kalra; Editing by Dhanya Ann Thoppil)