Offshore bond issuances by firms, banks fall over 50%

Offshore bond issuances by Indian companies and banks remained tepid in 2015, with the quantum falling more than 50% this year against 2014. Compared to the record amount of nearly $19 billion that was raised through this route in 2014, firms and banks issued foreign currency bonds worth close to $9 billion in 2015.

Kaustubh Kulkarni, managing director and head of debt capital markets, South Asia, at Standard Chartered bank attributes the fall in issuances to volatility in international markets and limited issuances from banks.

“We did not see many issuances from banks this year since credit growth remained low leading to a subdued requirement for funds. Further, the international markets saw several periods of volatility resulting in availability of fewer issuance windows,” Kulkarni added.

Ever since May, the global bond markets have seen multiple sell-offs leading to continuous volatility in the system.

Chetan Joshi, head of debt capital markets at HSBC India believes the theme of increased volatility has prevailed for a good part of this year due to variety of factors like fall in commodity prices, expectations of a rate hike by the US Federal Reserve etc..

“This has also caused spread widening in parts of the high yield universe, particularly in those linked to the commodity space,” he added.

Moreover, this year the domestic bond market saw yields falling considerably on account of a fall in repo rate by a total of 125 basis points in the calendar year. As a result, borrowing costs in the debt market reduced which made tapping the offshore market and swapping funds back to the rupee a costly affair.

“The INR bond market also presented an attractive funding alternative in terms of cost,” Kulkarni added.

Some of the major issuers in the offshore bond market this year were Reliance Industries, Bharti Airtel, Exim Bank and BPCL. However, only a handful of banks tapped the offshore markets like Bank of India (BoI), Exim Bank and IDBI Bank for raising considerable amounts.

The last major issuance of the year was by IDBI Bank which raised $350 million through a dollar-denominated green bond issue.

Bankers now believe 2016 is likely to see some improvement in terms of offshore bond issuances even as refinancing needs are likely to come back.