By Christina Titus
Dollar bond issuances by Indian companies slipped to a six-quarter low in the April-June period with just $1.84 billion raised. The amount mopped up in the January-March quarter was a much bigger $4.8 billion, while companies borrowed $2.27 billion overseas in the April-June 2024 period, data from Bloomberg showed.
Experts attribute the smaller dollar bond offerings partly to the weaker demand for credit and partly to lower interest rates in the local money market. Soumyajit Niyogi, director at India Ratings & Research, pointed out that with demand remaining subdued, companies have either delayed or reduced their capital expenditure resulting in a smaller requirement for funds.
“The fall in dollar bond issuances is in sync with the slowing demand for credit in the domestic market,” Niyogi observed, adding that the uncertain global environment had impacted the sentiment adversely. Nonetheless, companies like Tata Capital are planning to hit the overseas markets soon.
The falling yields on AAA-rated rupee bonds have prompted some companies to borrow locally, Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap, said. The yield on AAA-rated rupee bonds has come off by 32 basis points from this year’s high of 7.45% in March. On the other hand, the yield on dollar bond has been volatile and rose by 50 bps in the June quarter.
Meanwhile, companies borrowed $9.56 billion via foreign currency loans in the April-June quarter. This compares with $7.31 billion borrowed in the January-March period, data from Bloomberg showed. One reason for this is the need for borrowers to diversify their sources of funding. “Typically, exporters will opt to borrow in dollars, as they have natural hedge,” Niyogi explained.
