Foreign debt issuances drop in first half of 2014

Foreign debt issuances from India have seen a drop in the first half of 2014, as most of the re-financing activities took place last year due to which the need to raise funds was not much this year, said experts.

According to data from RBS, from India, $9 billion was raised in the January-June period compared with about $11 billion in the corresponding period in 2013. Among various currencies available to issuers, most of the fund-raising continues to be in dollars.

However, issue arrangers do not see this as a big drop as they are betting on the second half of 2014. For the full year of 2013, Indian corporates had raised $15 billion through foreign debt. “We expect to see significant refinancing transactions from Indian corporates. The same will help in reducing overall cost and adding tenure thereby further balance sheet strengthening,” said Manmohan Singh, head, debt capital markets (India and south east Asia) at RBS.

According to Singh, from the financial institution space, there could be Basel-III compliant capital issuances in international markets. “The current equity market performance has moved financial institutions to concentrate on equity market issuance; we expect them to focus on debt pieces post the same,” said Singh.

  But it is agreed by experts that at least for the next six months, the issuances may be more on the equity side. “Right now, most of the corporates are focusing on tapping the equity market. There will be QIPs (qualified institutional placements) and IPOs (initial public offerings). Right now, the markets are really good for equity issuances. Debt issuances can be done even after, say, six months, but this is probably the right time for equity issuances,” said Ravi Shankar, India head of  boutique investment bank Avista Houlihan Lokey.

According to issue arrangers, currently, ONGC is holding road shows in various cities across the globe to raise at least $1 billion. Based on the response from the road shows, the company shall decide about the currency in which the bonds will be raised and the tenure thereon.

In 2014, most of the debt issuances from Indian corporates picked up in the last few months, as spreads shrunk. “This is the right time to tap the market for Indian issuers who are planning to raise funds through foreign debt. Right now there is still liquidity available and foreign investors are willing to invest. You never know when the situation will change depending on global macros,” said an issue arranger.

According to issue arrangers, the next two-three months may continue to remain favourable for Indian companies planning to raise foreign debt.