Coronavirus scare: Indian firms step up dollar-raising as China goes slow

Record $7.15 billion raised in less than two months as Chinese companies reel from coronavirus impact

With Bharti Airtel’s subsidiary Network i2i raising $250 million from overseas markets, Indian companies would be raising a record $7.15 billion in less than two months, since the start of the calendar year, as global liquidity chases emerging market yields to compensate for the Chinese supply of bonds in times of a coronavirus scare.

Adani Transmission recently raised $310 million in the US private placement market by placing 30-year paper.

In January and February last year, Indian companies had raised $2.35 billion. In fiscal year 2019-20 so far, they have raised $19.24 billion as against $5.65 billion in the whole of 2018-19.

According to bankers involved in such deals, global liquidity is in abundance, but avenues to deploy funds are limited. With a coronavirus scare, good Chinese companies are not tapping the bond market actively. The issue size of Chinese companies has come down to $100 million, or even as low as $5 million. This is not enough to attract serious investors.

Indian companies, on the other hand, are finding the global bond market as a cheaper alternative to local bank loans. Indian banks are not very forthcoming with giving loans owing to the bad loan crisis, but global bond yields have fallen drastically. 

The US 10-year treasury notes are at 1.62 per cent now, from nearly 3.25 per cent in November 2018. Since April 2019, US bond yields have fallen steadily, dropping as much as 1.47 per cent in September 2019. No wonder then, Indian companies have found fundraising much cheaper from overseas.

In February, India Infoline Finance raised $400 million in three-year bonds at 5.87 per cent, Network i2i raised $250 million at 5.65 per cent, Adani Electricity Mumbai raised $1 billion through 10-year bonds at 3.95 per cent, and IRFC created a new benchmark through issuance of a 30-year dollar bond at 3.95 per cent. It also raised money through 10-year bond at 3.25 per cent.

IRFC 10-year bond, used to raise $700 million, was oversubscribed eight times and the 30-year bond was oversubscribed seven times for an amount of $300 million. “We were surprised by the response,” said IRFC MD Amitabh Banerjee. 

 “It is a right time to borrow in dollar as the lending rates are incredibly low in overseas markets,” said a spokesperson for Airtel, even as he did not want to link the cheap rates with the virus scare. The funds being raised are not hedged fully in most of the cases. For example, IRFC selectively hedges its foreign exchange exposure, saving Rs 600-650 crore in the process. i2i largely earns its revenues in US dollars that gives it a natural hedge when it borrows in dollar denominated debt, the Airtel spokesperson said. Adani’s private placement was also the first time in more than a decade an Indian company had managed to raise funds from the US private placement market.  

Dev Chatterjee contributed to this story