ICICI Bank plans to raise funds through foreign currency bonds in the coming quarters to meet the funding needs of Indian companies.
“Indian companies are carrying out acquisitions globally. Even for their funding needs in India, they are exploring foreign markets, since foreign currency funds are cheaper than rupee funds today,” Managing Director and chief executive Chanda Kochhar told Business Standard.
“We will keep doing a few more of these (foreign bond) issuances this year, because, in a way, money is raw material for this business,” she said. The country’s largest private bank is exploring fund-raising opportunities in currencies like the Swiss franc and the Japanese yen. In May, ICICI Bank had raised $1 billion by selling 5.5-year fixed rate notes with a coupon rate of 4.75 per cent. Kochhar said the bank would wait for some more time for markets to improve, before launching a new issue. “Every few months, we will review the situation. How much we would raise, at what tenure and what price, would depend a lot on the market,” she added.
| OVERSEAS BOND ISSUANCES THIS YEAR | |||
| Bank | Month | Size (in $ mn) | Currency |
| ICICI Bank | May | 1000 | US Dollar |
| Bank of India | February | 750 | US Dollar |
| Bank of Baroda | February | 500 | Euro |
| Indian Overseas Bank | April | 500 | US Dollar |
| Syndicate Bank | May | 500 | US Dollar |
| Canara Bank | March | 350 | US Dollar |
| State Bank of India | February | 335 | Swiss Franc |
| Union Bank of India | January | 200 | Swiss Franc |
| Exim Bank | March | 190 | Swiss Franc |
| Source: Banks | |||
A series of rate increases by the central bank had made domestic funds expensive in the last 18 months. Offshore issuances in the first six months this year touched a record $7.6 billion—more than thrice the $2.2 billion raised in the first half of 2010. Financial institutions raised $5.5 billion, while non-financial entities and industry houses raised $2.1 billion, according to Dealogic. However, the euro zone debt crisis and the downgrading of the US sovereign rating have raised doubts over investors’ appetite for such issuances.
“Businesses would grow and therefore, they would need money. Hence, we would raise funds through this route. But a lot depends on the interest differential between the rupee and other currencies,” Kochhar said.
