Dollar bond sales by Indian companies outstrip loans
Banks cautious about lending in response to Eu debt crisis
Mumbai: Bond sales in US dollars by Indian companies are outstripping loans for the first time in five years as banks worldwide lend less in response to Europe's debt crisis and rising capital requirements.
Borrowers have raised almost $1.7 billion (Dh6.23 billion) in 2012, led by billionaire Mukesh Ambani's Reliance Industries Ltd., which sold $1 billion worth of 10-year notes last week. Companies' syndicated loans denominated in the US currency totalled $505 million, the least since 2004, according to data compiled by Bloomberg. The last time bonds beat loans at this stage of the year was in 2007.
The surge in bond sales is being spurred by record inflows into emerging-market debt funds and the rupee's 8 per cent advance this year, the best performance among Asia's most-traded currencies. Dollar borrowing costs for Indian companies have dropped 97 basis points in 2012 to a three-month low of 512 basis points, or 5.12 percentage points, over US Treasury yields, while the London Interbank Offered Rate, to which loans are pegged, rose to a two-year high of 0.58 per cent last month.
"With the European banks pulling out of the region, bonds will be many companies' best bet," Viktor Hjort, the Hong Kong- based head of fixed-income research at Morgan Stanley, said in an interview yesterday. "Corporate bond supply will rise as the cost of loans will rise."
Funds squeeze
Indian companies raised $8.1 billion from dollar bond sales in the whole of 2011, compared with the $28.5 billion they obtained from US currency loans, according to data compiled by Bloomberg. That may change this year as European banks curtail funding in Asia, according to Morgan Stanley.
Natixis SA, the investment-banking arm of France's second-largest retail lender, said in Dec-ember it is scaling back telecommunications and shipping financing in Asia. Societe Generale, France's second-largest bank, agreed to sell $600 million of commercial-property loans to Australia's Macquarie Group Ltd. as it pares assets, people familiar with the matter said on November 30.
