At least four local borrowers – Power Finance Corp, Rural Electrification Corp (REC), Shriram Transport Finance and State Bank of India (SBI) – are seeking to collectively raise up to $2.5 billion in overseas bond sales after Exim Bank’s spectacular debut for the year earlier this week.
Both Shriram and SBI launched their issues on Wednesday. The proceeds could be used to expand credit.
“We will use the bond sale proceeds for lending as we see demand coming up this year,” said Umesh Revankar, managing director at Shriram Transport Finance. “This is a social bond under ESG framework. We will lend the money to the sustainable income generating sector.”
Shriram Transport sought to raise $500 million via overseas bonds that initially offered 4.65% with three and a half year maturity. The company received a subscription order of about $1.5 billion dollars at the time of writing this article. These bonds, rated BB-, are high-yielding papers. The rate is expected to finalised at 4.4 percent.
Fundraising this year could only accelerate as companies plan to meet resurgent demand amid accelerating economic activity.
Other companies could not be contacted immediately.
Government-owned REC has obtained central bank approval to raise up to $2 billion from overseas markets, which would be in tranches. It is currently considering various options. Power Finance Corporation is in advanced talks to raise up to $1 billion.
SBI was raising about $600 million via offshore bonds that initially offered rates derived after adding 175 basis points over and above five-year US Treasury paper. The SBI bond got bids of more than $2 billion allowing bankers to price it at 140 basis points above the 5 year US treasury, 35 basis points tighter than the 175 basis points above 5 year US treasury priced earlier.
Singapore-based GIC, Hong Kong-based AIA Insurance, China Asset Management Company, Quarter Insurance company, Eastspring Investment, New Development Bank (China) are said to have subscribed SBI bonds among others.
These bonds will mature in five and a half years. Fitch Ratings assigned a ‘BBB-(EXP)’ expected rating to State Bank of India’s bonds, which is the lowest in the investment grade.
The rating grade reflects Fitch’s expectation of a very high probability of extraordinary support from the Indian sovereign (BBB-/Negative), if required, the rating company said in a note.
The Shriram issue is also open to US investors and prices could well be tighter at the close of subscription processes due to higher demand, people familiar with the deal said.
“This has been a record week for Asia ex-Japan bonds,” said a person involved in the issues. “Companies from China, India and also a sovereign bond from Indonesia have together raised $16 billion in the first two trading days of the year. We have priced more than $2 billion of bonds from India and more are lined up tomorrow; so it is a solid start to the year.”
Strong investor demand helped Exim Bank price 10-year bonds at 2.25% coupon. It obtained the lowest ever rate by any issuer for a ten year paper out of India.
Easy liquidity, low rates and global vaccine rollouts have mitigated economic risks caused by the Covid 19 pandemic, allowing investors to seek higher returns on their investments.