Bharti Airtel led the borrowing list.
By R. Chandrasekaran
CHENNAI: The external borrowing or sale of bonds by the Indian corporate is likely to touch record level in the current year if the first half of the year is of any indication.
This may sound that it will benefit or address at least partly the Indian government’s problem of tackling the deteriorating current account deficit. However, after the rupee weakened following the U.S. Federal Reserve’s comment on the likelihood of stopping of easy money policy during the middle of May, there has not been significant activity. The recent spike in bond yields in the U.S. will likely hurt a similar performance in the second half, but could manage to grow higher than the last year.
As much as $12.5 billion has been raised by the domestic corporate during the first six months of 2013 compared to $14.5 billion raised during the whole of the last year. The Britain-based Royal Bank of Scotland (RBS) said that Indian companies took advantage of the lower interest rates in the U.S. apart from strong liquidity in the financial markets globally.
The British bank’s Indian unit alone handled ten deals worth $986 million and is also working on more issuances. The bank believes that the current calendar year could well see Indian corporate raising $15 – $17 billion through external borrowing or bond sales.
Bharti Airtel was the biggest issuer of bond mopping up $1.5 billion in March followed by Mukesh Ambani-controlled Reliance Industries raising $800 million through bond sale. Indian Oil Corporation, which raised $500 million in July, was probably the only company to raise money from overseas after the rupee weakened significantly, according to a news agency report.
However, another report indicated that Indian firms have mopped up $1.95 billion in ECBs in June compared to $1.99 billion last year. But 45 percent of this was meant for import of capital goods. The Indian government had no alternatives but ease the norms to attract more funds from the foreign countries, be it from bond sale or FDI.
The weakening rupee and the recent spike in bond yield in the U.S. will likely hurt a repeat performance in the second six months of 2013. However, the government needs more inflows of money from overseas to bring stability to the Indian currency and also address the deteriorating current account deficit. Therefore, the policy makers are likely to come up with ideas that could attract more investors to invest in either Indian corporate bonds or the government sponsored bonds.
To contact the author, email to rchandrasekaran@americanbazaaronline.com