India Inc has taken second position among Asian countries in terms of funds raised through overseas bonds in 2013 next only to China. Indian companies in January-March 2013 period were able mop up a record 16% of the total funds raised by Asian companies. In 2012, Indian companies raised $9.8 billion through the same route, but it was just 7.2% of the $136 billion raised by Asian companies.

Investment bankers say more Indian companies and banks are issuing bonds in foreign currencies to take advantage of the lower cost of financing and foreign investors are looking to diversification of risk with increased allocation for India.

Total funds raised in the Asian market between January and March was about $40 billion and Chinese companies raised $8 billion, while Indian companies raised $6.3 billion, and Philippines raised $2.4 billion.

Domestic companies that raised funds from the overseas market through bond issuance have been able to raise funds at the lowest coupon ever. This has happened due to excess liquidity in the market as policy makers since 2009 from the US, Europe and Asia reacted to the deepest financial crisis since the Great Depression and pumped unprecedented amounts of money into the global economy and suppressing interest rates at record lows. For instance, in 2007, Reliance Industries (RIL) raised about $162 million through 10-year dollar-denominated bonds at a coupon of 6.24%. In 2012, RIL issued a similar 10-year period bond but paid a coupon of just over 4%.

This year, Indian companies are expected to raise about $17-$20 billion from the overseas route, nearly double of the total amount raised last year. Already the country’s largest bank, State bank of India, is gearing to raise up to $1 billion in the next few days, which could be followed by another $1 billion raise by ONGC Videsh, the overseas unit of the country’s biggest energy explorer. According to sources, Union Bank of India is also in talks to raise at least $500 million from the overseas bond market.

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