Tata Capital plans to raise $750 mn in debut foreign funding next fiscal yr

India's Tata Capital is looking at overseas fundraising for the very first time and hopes to raise around $750 million via offshore bonds or loans in the next fiscal year starting in April, a senior company official told Reuters on Wednesday.

"The company, as a part of diversifying its liability base, may evaluate raising up to $750 million through overseas loans or bonds in FY25," said Rakesh Bhatia, chief financial officer at the non-bank financial company (NBFC).

The company is likely to start roadshows for the same by the end of March, he added.

"For overseas borrowings, we may also evaluate dollar bonds as there has been lot of interest by overseas investors in Indian corporates."

Fundraising via dollar-denominated bonds by Indian corporates touched a 14-year low of $4.1 billion in 2023, as Fed rate hikes pushed US yields against which these bonds are benchmarked, sharply higher.

It has bounced back in recent months. State Bank of India, HDFC Bank and Shriram Housing Finance have raised an aggregate of $2.1 billion via dollar bonds in the first two months of 2024.

"Indian companies are increasingly tapping overseas markets for fundraising as US yields have eased and there are expectations of rate cuts," said Soumyajit Niyogi, a director at India Ratings, a fully owned subsidiary of the Fitch Group.

Tata Capital is yet to finalise the tenor or quantum of its borrowing but recently received a first-time issuer rating of BBB- from S&P Global Ratings and Fitch Ratings.The Tata Group company's loan book stands at around Rs 1.5 trillion ($18.1 billion) which it aims to grow at over 25 per cent in FY25 and sees a similar rise in its borrowing needs.

Funding costs for NBFCs have risen after the Reserve Bank of India asked banks to set aside higher capital on loans to NBFCs, pushing the latter to tap the bond market.

Tight liquidity conditions have also kept the corporate bond yield curve inverted, with yields on short-term debt staying above longer duration papers. NBFCs typically opt for bonds of below five-year maturity for their asset-liability management.