Foreign currency bond issuances out of India have crossed the $16-billion mark this year so far with Power Finance Corporation and ReNew Power hitting the dollar bond market on Thursday. PFC and ReNew Power are expected to raise a total of over $1 billion through these issuances, sources close to the deals told FE.
Power Finance Corporation (PFC) is understood to have priced its 5-year dollar bonds at 187.50 basis points (bps) over the corresponding US treasury yield while it also priced its 10-year dollar bonds at 240 bps over the corresponding US treasury yield, sources close to the matter said.
The final size of the transaction was not clear but sources indicated PFC may raise a total of at least $750 million through the issues.
“PFC’s bond issue saw a massive response. Bids worth over $4.5 billion were received,” said a source.
Meanwhile, ReNew Power is understood to have priced its dollar bonds having a tenor of close to 3 years at 6.45% on Thursday. The firm is set to raise close to $300 million, sources said. FE could not independently verify the details.
Sources had earlier told FE that firms like Indian Railway Finance Corporation (IRFC) and ONGC are in talks with bankers to explore the possibility of raising a billion dollars each from the dollar bond market.
According to bankers, the remaining four months of 2019 is likely to see a reasonable number of foreign currency (FCY) bond issuances out of India.
It is noteworthy that last year, Indian companies and banks had raised close to $6 billion from the FCY bond market — a figure that has already been surpassed in the first few months of 2019.
Some of the issuers who raised funds in the foreign currency bond market this year included State Bank of India, Indian Oil Corporation, Shriram Transport Finance, GMR Hyderabad International Airport.
In a recent interview, Chetan Joshi, head of debt capital markets at HSBC India said the market was very dislocated last year with US bond yields on an upward march till November.
“This narrative has changed quite dramatically from January this year when the Fed first signalled a shift away from the upward trajectory in rates, which had a major impact on sentiment. The problem facing bond investors in 2018 in regard to a structurally rising bond yields hurting their portfolio has now completely reversed,” he said.
Indeed, since the beginning of January 2018, the 10-year US treasury yield had risen by 79 basis points to 3.24% by November 2018. However, since then the story reversed with the yield falling all through 2019 to reach 1.46% by September 2019.
“The total foreign currency bond issuances out of India could even touch $25 billion as we think a few public sector firms and financial institutions are set to hit the market. Anything above $19 billion would be a record issuance out of India,” said a banker not willing to be named.