Dollar bond issuance from Indian companies looks firm to rush in the New Year off a 2017 record as issuers cash in on bullish investor sentiment and the lowest borrowing costs in a decade.
Dollar-denominated bond sales from India soared almost 90% to an all-time high of $15.2 billion in 2017, Bloomberg-compiled data show. Historically low interest rates and credit spreads have allowed some of the nation’s best-rated companies to access markets at very competitive pricing, according to Bank of America Merrill Lynch. Strong investor appetite internationally will spur further gains in 2018, according to Jay Capital Ltd.
“Investors are ready to lap up India paper,” said Asit Bhatia, Managing Director for global corporate and investment banking at the Indian unit of Bank of America Merrill Lynch in a phone interview. “There is a dearth of good Indian paper in the dollar bond markets.”
ICICI Bank Ltd garnered more than $850 million of orders for a $500 million 10-year bond issued this month, while Reliance Industries Ltd’s $800 million offering in November was oversubscribed more than 1.6 times the issue size, people familiar with the matter said.
Spreads over Treasuries for Indian dollar bonds tumbled to 169 basis points last week, the lowest since 2007, according to ICE BofAML index data.
“There is a lot of demand for Indian bonds from international investors, especially in the five-year tenor,” said Raj Kothari, London-based head of trading at Jay Capital in a phone interview.
India’s economic growth is expected to rebound to 7.5% in the year through March 2019, from an estimated 6.7% this year on the back of higher private consumption and investment demand, according to the median of 32 forecasters surveyed by the Reserve Bank of India.
The first quarter of 2018 may be particularly strong for dollar issuance from India, according to S&P Global Ratings analyst Abhishek Dangra, who sees new issuers from the utilities sector and additional offerings by existing borrowers underpinning sales in the New Year.