 "Greece crisis hits India Inc's offshore fund raising plan")
Offshore bond issuances by Indian companies have taken a hit due to the global uncertainties which gathered momentum with Greece's debt crisis.
Though the European Union and Greece now have a deal, the outlook for fund raising is hit by market volatility and a tepid economic growth recovery in India.
According to issue arrangers, Adani Port and Power Finance Corporation did road shows in the recent past but did not go ahead with their issuances. Axis Bank did an investors' meet in Europe but ultimately did not tap the market. And, the uncertainty over Greece and the rest of the euro zone prompted State Bank of India, the country's largest lender, to delay plans for a $1.5-billion bond offering. Though the European Union and Greece now have a deal, the outlook for fund raising is hit by market volatility and a tepid economic growth recovery in India.
Read more from our special coverage on "GREECE CRISIS"
Data from Deutsche Bank shows for the first six months of 2015, total issuance volume dropped 31 per cent to $6.5 bn, compared with $9.5 bn in the same period a year earlier.
ALSO READ: Greece, Eurozone nations reach deal on bailout
"Supply from Indian banks is down 50 per cent, with only three issuances so far. Given large redemptions later this year, bank supply is expected to pick up in the second half of 2015. Corporate issuances are also down almost 50 per cent compared to last year. Any relaxation in the external commercial borrowing guidelines on end-use or a significant pick-up in the capital expenditure cycle can reverse this,” said Randhir Singh, managing director and India head–financing at Deutsche Bank.
For the full year of 2014, issuance volume was $18.7 bn, of which Deutsche Bank did deals worth $9.8 bn. Data shows the pace of issuance volumes began to get slower from May this year, when Indian issuers raised a meagre $200 million, compared with $1,624 mn the previous month. In June, Indian issuers raised $1,000 million.
Latest media reports suggest euro zone leaders have made Greece surrender much of its sovereignty to outside supervision, in return for agreeing to talks on a bailout. “Moving ahead, we will should see a suitable agreement on Greek debt restructuring. That will help reduce the volatility. The US Federal Reserve might begin raising rates in September-December. On the basis of these two factors, one could see an increased level of market activity in the coming months,” believes Manmohan Singh, managing director and head of debt capital markets, India & Southeast Asia, at Royal Bank of Scotland.
ALSO READ: Greece closer to desperately needed deal with creditors
The situation in India has in fact improved in recent times, with inflation and the current account deficit under control, growth picking up and the rupee being stable.
“The view is positive about India now, compared with the first half of 2014. As for the months ahead, we are yet to see signs of a pick-up in issuances,” said Sanjeev Lall, head, institutional banking group, at DBS Bank. Lall added that signing of a Greece deal to address debt concerns will be positive for the market — many financial institutions and companies which have kept fund raising on hold will be back.
"Supply from Indian banks is down 50 per cent, with only three issuances so far. Given large redemptions later this year, bank supply is expected to pick up in the second half of 2015. Corporate issuances are also down almost 50 per cent compared to last year. Any relaxation in the external commercial borrowing guidelines on end-use or a significant pick-up in the capital expenditure cycle can reverse this,” said Randhir Singh, managing director and India head–financing at Deutsche Bank.
For the full year of 2014, issuance volume was $18.7 bn, of which Deutsche Bank did deals worth $9.8 bn. Data shows the pace of issuance volumes began to get slower from May this year, when Indian issuers raised a meagre $200 million, compared with $1,624 mn the previous month. In June, Indian issuers raised $1,000 million.
Latest media reports suggest euro zone leaders have made Greece surrender much of its sovereignty to outside supervision, in return for agreeing to talks on a bailout. “Moving ahead, we will should see a suitable agreement on Greek debt restructuring. That will help reduce the volatility. The US Federal Reserve might begin raising rates in September-December. On the basis of these two factors, one could see an increased level of market activity in the coming months,” believes Manmohan Singh, managing director and head of debt capital markets, India & Southeast Asia, at Royal Bank of Scotland.
ALSO READ: Greece closer to desperately needed deal with creditors
The situation in India has in fact improved in recent times, with inflation and the current account deficit under control, growth picking up and the rupee being stable.
“The view is positive about India now, compared with the first half of 2014. As for the months ahead, we are yet to see signs of a pick-up in issuances,” said Sanjeev Lall, head, institutional banking group, at DBS Bank. Lall added that signing of a Greece deal to address debt concerns will be positive for the market — many financial institutions and companies which have kept fund raising on hold will be back.