Indian companies' dollar bond fundraising hits 14-year low: Here's why
In 2023, Indian companies experienced their lowest dollar bond fundraising since 2009, raising a mere $4.1 billion through six bond issues. LSEG Workspace data reveals that this decline is due to an unfavorable global interest rate environment and high global yields, prompting Indian issuers to borrow locally instead. Deutsche Bank's Sameer Gupta explained, "Throughout 2023 global interest rate environment was not favorable and the cost of raising dollars hedged into rupees was comparatively higher than (accessing) domestic liquidity."
Shift to foreign currency loans amid high bond yields
With the bond market proving unfavorable, Indian companies turned to foreign currency loans, that are tied to floating interest rates. These loans reached a total of $22.13 billion, the highest amount since 2014. Furthermore, Indian firms secured $2.15 billion in yen-denominated loans in 2023, a significant increase from $643 million in 2022. Among the top borrowers in the foreign currency loan market, was Reliance Industries, raising over $8.5 billion by October.
Expectations for dollar bond issuance in 2024
Bankers predict a rise in dollar bond issuance next year as global bond yields stabilize, resulting in a decrease in foreign currency loan volume. While companies have expressed interest in tapping the dollar bond market in the upcoming quarter, actual volumes will likely increase in the second/third quarter of 2024. Firms such as Exim Bank and REC should enter the market with dollar bond offerings, as per merchant bankers.
