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(Bloomberg) — Indian firms’ dollar bond offerings are set to gather pace with at least $4 billion of sales likely in the rest of 2024, as the Federal Reserve signals lower interest rates, according to a JPMorgan Chase & Co. executive.
With interest rates on dollar bonds set to decline, more Indian firms will seek to tap a market that allows them to sell debt with longer tenors and bigger size, Anjan Agarwal, head of debt capital market in India at JPMorgan, said in an interview.
Agarwal’s estimates suggest that India’s dollar-bond issuances in 2024 will be more than double the prior year, as better returns and investors’ desire for more exposure to the fast-growing economy drives demand. Shadow lenders in the nation are also seeking new capital after the central bank late last year put curbs on risky bank loans.
“While corporates will likely utilize the proceeds for refinancing, for non-banking finance companies this is new capital,” said Agarwal, adding shadow lenders are looking to diversify their funding sources.
Indian companies’ US-currency bonds have returned 7.37% so far this year, among the highest in the region and exceeding the 5.68% on broader Bloomberg Emerging-Market Asia Dollar Credit Total Return Index.
The nation’s firms have already borrowed nearly $10 billion via dollar bonds this year, surpassing the annual amount raised in the previous two years, data compiled by Bloomberg showed. Continuum Green Energy India Pvt., Shriram Finance Ltd. and Adani Green Energy Ltd. are the biggest issuers of dollar bonds this year.
Some of the prominent shadow banks that sold bonds offshore include Piramal Capital & Housing Finance Ltd., Muthoot Finance Ltd. and Manappuram Finance Ltd.
While the borrowing cost in the local bond market is 50-100 basis points lower than dollar notes on a fully hedged basis, issuers are tapping the overseas market as it offers better liquidity, Agarwal said.
“Corporate issuers have typically borrowed with average maturities in the range of five to 10 years this year, compared with two to five years in the local rupee bond market,” he said.
–With assistance from Divya Patil.
©2024 Bloomberg L.P.