Indian cos may raise $13-14 bn through global bonds in 2014

Fund raising could surpass if currency hedging risks dip

Global Rating agency Moody's said the foreign currency issuances by non-finance Indian companies is expected to touch $1,314 billion in 2014 on improved economic outlook and reforms to ease in raising funds aboard.

The amounts raised could be even more in 2015 if the cost of hedging currency risks decline.

The foreign currency bond issuances from Indian companies and financial institutions are expected to reach a record high this year, Moody's said in a report.

The cross-border bond issuance from Indian financial and non-financial institutions reached $15.9 billion for first seven months of 2014, near the record high of $16.4 billion reached last year, according to data from Dealogic.

For the non-financial companies, foreign currency bond issuance from January through July reached $11.2 billion, surpassing the total $10.2 billion issued in 2013.

There may be an additional $2-$3 billion of foreign currency issuance from non-financial companies during the remainder of this year, which would bring the corporate total to about $13-$14 billion for 2014, it said.

Three sectors - oil and gas, metals and mining, and telecommunications -issued 67% and 76% of the foreign currency bonds from Indian non-financial companies in 2013 and 2014, respectively.

The oil and gas and metals and mining companies will continue to drive the increase in issuance. That's because they have a natural hedge against exchange-rate risk and do not need to swap their foreign currency borrowings into local currency.

These companies generate revenues in the same currency as their debt, both of which are typically US dollars. This currency matching limits the risk of their profitability declining or debt levels and borrowing costs rising if the rupee weakens against the foreign currency, Moody's said.

There would be also an increase in issuance from pharmaceutical and information-technology and business-process-outsourcing companies. It becomes possible as they derive a large part of their revenues from exports, which are typically denominated in US dollars.

The dollar revenues give them a natural hedge against currency fluctuations for their US dollar-denominated debt. Issuance from infrastructure companies will also increase given their large funding needs.