India Inc lines up bond sale plans after RIL's record issue

Enthused by corporate giant Reliance Industries' $1.5-billion dollar bond sale, a host of companies have lined up plans to raise funds through sale of bonds in global markets.

While more than half a dozen companies, including the likes of Anil Ambani group firm Reliance Communications, ICICI Bank, Axis Bank and Essar Energy, have already firmed up their bond issuance plans, others are also looking to tap this fund- raising route, banking sources said.

RIL's record USD 1.5 billion bond sale has come as a boost for India Inc, a senior banking official said, adding that international debt market has emerged as a major avenue in the backdrop of India emerging as a major source for foreign funds.

Given the recent surge in inflow of foreign funds into stocks raising concerns about over-heating in the Indian equity market, funds invested through bonds is becoming a relatively safer way, he added.
   
The bankers said that the Indian companies in final stages of fund-raising through bonds include public sector firm Rural Electrification Corp (REC), ICICI Bank, Axis Bank, JSW Steel, Ruias-promoted Essar group's London-listed arm Essar Energy Plc, IDBI Bank as also telecom major RCOM.
   
The analysts said that the impressive success of RIL's first bond issue after 13 years has given a huge boost to India Inc's plans of raising money in the international markets.
    
Billionaire Mukesh Ambani-run RIL late last week sold USD 1 billion of 10-year notes and USD 500 million of 30-year bonds. Reliance Holding USA Inc, a wholly owned subsidiary of RIL, priced the 10-year notes athigher than even the similar maturity US Treasury notes.
    
Reliance Holding will use the net proceeds to refinance existing debt, making other business investments and for general corporate purposes. It is the largest ever public market offshore bond offering by RIL and largest ever corporate bond from India.
    
While RIL, India's most valuable company and the only corporate from Asia to receive ratings higher than its sovereign from both Moody�s and Standard & Poor�s, was expected to succeed with the offering, the avid interest shown by the international investors has excited many companies waiting in the wings.
    
Rural Electrification Corporation (REC), which was recently granted Infrastructure Finance Company status by the RBI, could be the next Indian company to raise funds through bonds. The company is planning to raise USD 500 million via bond issue in Europe, Singapore and Hong Kong in the coming months.
    
Besides, ICICI Bank is also expected to sell as much as USD 1 billion debt papers, while at least two other banks, Axis Bank and IDBI Bank are also believed to be preparing for bond sales.

Anil Ambani-led RCOM is also expected to be exploring either a bond offer or additional loans, while Essar Energy might sell its first foreign-currency bonds next year.
    
JSW Steel also plans to sell its first dollar bonds in three years.
    
Overseas investors have already poured in over USD 10 billion into India�s corporate and government debt this year, which is believed to be more than the combined inflows over the last eight years.
   
This is despite India having had only 11 international issues so far this year in comparison to 69 in South Korea.
   
The bankers said that the only concern on this front was the issue of withholding tax, attracted by offshore bond issuance from the country. RIL managed to address this issue by selling the  bonds through its subsidiary Reliance Holding USA.
    
RIL's issue saw huge depth in demand as orders reached USD 11.6 billion from 430 accounts.
    
This is Reliance's first return to the global markets since its last USD issuance in 1997 and its largest ever public market offshore bond offering.
    
Commenting on the offering, wherein the largest interest was shown by the US investors, RIL's Chief Financial Officer Alok Agarwal said: "It is truly a global benchmark supported by high quality accounts that believe in Reliance's credit and value creation story."
    
The interest in Indian offerings come in the backdrop of the economy managing to keep its growth rate attractive.
    
In comparison to near-zero interest rates in Japan and the US, Indian assets present a growing opportunity for investors. As companies get bigger and can tap the bond market for longer-term financing, it is believed to be better from a credit perspective than conventional loans.