Moody's upgrade good news for mid-rung corporates

While the upgrade of India outlook by Moody's was anticipated for a long time, investment bankers active in syndication of foreign currency debt for Indian corporates feel that the upgrade will add to the liquidity of foreign debt papers with a large pool of new investors accessing these newly turned investment grade papers.

As regards pricing of the papers, while triple A corporates were already enjoying a heavy discount in pricing, the upgrade will help middle-rung corporates get a fine leverage in foreign debt pricing.

According to Vishnu Deuskar, chief executive officer, ABN Amro, "Even when India was not investment grade, we were getting much better pricing as an upgrade was already discounted.

Many countries which were constrained by sovereign rating, could manage better spreads over Libor (London interbank bid-offer rate) due to their inherent strength.

While pricing will have only a marginal impact, it will act as a psychological boost. Moreover, liquidity of foreign debt papers will rise as many new investors are looking at investment grade papers and will join in now."

Echoing similar but a more optimistic view, M A Ravikumar, head-global treasury, Standard Chartered, said that pricing of foreign debt papers will rise but not very significantly as part of the pricing has been discounted long back as the kind of rating which the Indian corporate are getting are not equivalent to that of sub-investment grade ones.

Tarun Mehrotri, treasury head, HSBC India, also added that the country was expecting an upgrade for quite some time.

However, the upgrade is beneficial for Indian borrowers and Indian papers.

These borrowers can access overseas market with greater ease as investors in these papers will be also increasing.

Siddharth Mathur, strategist, JP Morgan India, feels that the development does not come as a surprise.

Nevertheless, it does come at a time when India is being looked at favourably by international investors and therefore it will contribute to better pricing of debt papers in the overseas market.