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Exim Bank plans to tap US institutional investors for overseas bond issue |
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MUMBAI: State-owned Export Import Bank of India plans to tap US institutional investors for the first time as it plans to float an overseas bond issue to raise as much as $1-1.5 billion, two people familiar with the matter told ET.
This maiden issue will set the tone for state-backed firms such as IRFC and NHAI to raise funds from overseas borrowers as the government strives to raise its infrastructure investments, especially at a time when the chips are down for private entrepreneurs.
The bank, which has raised funds by selling bonds abroad under Regulation S stipulation, will now offer bonds to US investors under Rule 144A, a sign of improving issuer credential, they said. The paper would be of 5 to 10-year maturities.
"Exim Bank is now talking to investment bankers, and is likely to finalise the issue in the next few months once the turmoil in the global market recedes," said one of the persons cited above.
Through this issue, the bank would seek to lower the borrowing cost while diversifying its borrowing base. Those bonds are priced normally 10-15 basis points lower than Regulation S securities while investors find more market liquidity compared to others, for those securities.
The main difference (between two categories) is that with 144A, issuers can sell bonds to US qualified institutional buyers (QIBs) in the country while Reg S only allows issuers to sell to investors outside of the US territory, said a spokesperson from Dealogic, a Hong Kong-based analytics firm.
But, an issuer needs higher credibility to mop up funds under Rule 144A. Being a government-owned entity, Exim enjoys an investment grade, BBB (negative), which is also India's sovereign rating.
US investors now have a good appetite for quality Indian papers, especially when it is quasi-sovereign, said an investment banker.
So far this year, four Indian entities including Bharti Airtel, Reliance Industries, Adani Ports & Special Economic Zone and Lodha Developers have collectively raised around $3.6 billion under the category via five deals, show data from Dealogic.
"We are looking at the market. Whenever there are opportunities, we will evaluate them," Yaduvendra Mathur, chairman and managing director of Exim Bank, was quoted saying a few weeks ago.
The bank lends to Indian companies to acquire companies overseas while extends credit to foreign banks with the rider that they have to import from India.
Now, they are promoting project exports where they encourage Indian companies to export finished products instead of raw materials. This, in turn, helps them earn better margins.
Source : economictimes.indiatimes.com
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