Tuesday, August 26, 2014

Foreign investors flock to India to meet debt issuers as outlook turns rosier

MUMBAI: A host of foreign investors and funds will be meeting corporate leaders in India next month, the first time since the global financial crisis, signifying changing perception about the country's growth potential.

Ultra-long-term funds, sovereign wealth funds, mutual funds and fund managers from Singapore, Hong Kong and the US will be among those attending the Standard Chartered Bank investors' meet in the city on September 23, according to Rahul Banerjee, managing director and regional head, South Asia capital markets, Standard Chartered Bank.

"There is investor interest in India and it is quite unprecedented to see debt investors coming to the country to meet issuers face to face," Banerjee said. "With the new government, the investment sentiment is changing."

According to Banerjee, the withholding tax, as per the Budget announcement, would be at 5% from October, which would "incentivise borrowers to tap the bond market".

"In 2014-15, we would see many issuers with BB & BBB- ratings tapping the bond market. The funds could be used for capex and refinance. In calendar year 2014, we could see companies raise debt in the range of $20-22 billion."

Credit ratings for bonds below BBB grade which incidentally is also India's sovereign rating are termed as "junk" or "high-yield" bonds.

Papers with BBB and higher ratings are investment-grade securities. In the seven months to July, Indian companies raised $14.7 billion overseas, which was up 26% from the year-ago period and $4 million more than the collection for the whole of 2013.

The bond market outlook is expected to be constructive for the remainder of the year, supported by strong liquidity, continued low interest rate environment and robust investor demand for debt," said Neville Fernandes, head of debt capital markets at Citi India.

"However, geopolitical risks and unanticipated changes in Global Central Bank's policies on interest rates are two key concerns that may have an adverse impact on investor sentiment and fund flows."

Many Indian companies firmed up their overseas bond issuance plans soon after the Lok Sabha election results in May. More are expected to tap the market in September-October, dealers said.

The borrowing cost is significantly lower than last year's. For instance, Rolta had paid 10.75% last calendar year against 1.875% less this time.

Barclays, StanChart, BNP, Citi Bank, Deutsche Bank, Royal Bank of Scotland are among the investment banks advising Indian companies in offshore bond issuances.

indiatimes.com

No comments: