Mumbai: Four companies – Indian Railway Finance Corporation, Continuum Green Energy, Infrastrcuture and ReNew Power – plan to raise as much as $2 billion via overseas bond sales next week, three people with knowledge of the matter told ET.
The fundraising could be a test of investor appetite after the Union Budget revealed a wider fiscal deficit, which weighs on India’s future inflation expectations and its impact on the currency.
“Any investor exuberance over individual company bond sales post the budget will actually negate any negative sentiment in India due to a widening fiscal deficit,” one person said.
IRFC, the financing arm of the Indian Railways, started roadshows on Tuesday and the proposed offshore issuance is likely to be launched in a day or two. It plans to raise at least $750 million, an amount that may be increased, depending on investor response.
bonds, marked as investment grade, are likely to be of 10-year and 30-year maturities. The indicative price guidance for both series is set with 170 and 230 basis point mark-ups, which will be added to the respective US Treasury benchmarks. The bond proceeds are likely to be used to fund projects along with other business purposes.
Finance minister Nirmala Sitharaman said in her budget speech on Monday that the government plans to create a ‘future ready’ railway system by 2030. IRFC was recently listed in the equity market.
IRFC, Continuum, IRB and ReNew did not immediately respond to ET’s queries.
Continuum, a renewable energy company, launched its bond sale on Tuesday, aiming to raise up to $560 million. The borrowing company is Continuum Energy Levanter Pte, which is an overseas subsidiary.
The company was said to have garnered subscription of about 2 billion until the press time. The high-yield bonds, rated BB+, were initially expected to yield 4.875% with an average maturity of 5.1 years. Yields tightened at 4.5% at the close of the deal, dealers said.
Goldman Sachs-backed ReNew Power aims to raise $460 million and is in talks with banks. It has obtained a green bond certification. The company’s Mauritius-based special purpose vehicle could issue the proposed bonds.
IRB is aiming to raise $300 million to refinance a credit facility taken to build Mumbai-Pune Highway, said a source.
Barclays, Deutsche Bank, HSBC, JP Morgan, MUFG and Standard Chartered are among the investment bankers helping these companies to raise money. The banks could not be contacted immediately for comment.
The renewable companies propose to use the bond funds to repay high-cost rupee-denominated bank loans or to expand their non-conventional energy projects.
The US 10-year Treasury yield doubled to 1.1% from August last year. The international gauge, used to price foreign bonds, is still lower than its near-term peak of 3.22% in October 2018.
For the borrowers, there is no natural hedge available as they will likely bring the funds home.
“Even after adding the cost of covering currency risk, it still makes sense to raise money offshore before US Treasuries shoot up further,” said a senior executive involved in the fundraising process.