Vedanta Resources, Jindal Steel and Power Limited, Mumbai International Airport Limited (MIAL), and Sukhbir Agro Energy were among the companies which had planned dollar bonds issues and had already appointed arrangers and started legal background work. However, all of them have put their proposed issues on hold, according to people aware of the matter.
Vedanta Resources had appointed investment banks for a bond issue of around $1billion but is not going ahead with the issue for now, said people in the know.
MIAL, which is now under the Adani fold, had also appointed multiple banks including Standard Chartered, Barclays, Deutsche Bank and JP Morgan for a proposed $1-billion overseas bonds issue. It was all set to launch the issue last week but held back, said sources.
Jindal Steel and Power Limited and Sukhbir Agro Energy were planning issuances of about $500 million each. Both had appointed investment banks and law firms such as Khaitan and Co and Cyril Amarchand Mangaldas. However, they put their proposed bonds issues on hold after beginning legal documentation work.
Vedanta Resources, MIAL, Jindal Steel and Power and Sukhbir Agro Energy did not respond to ET’s queries. The investment banks and law firms involved could not be reached for comment.
“This is a function of a volatile macroeconomic environment driven by a hawkish US Fed stance,” said Love Sharma, the Singapore-based head of India credit for Lombard Odier, a Geneva headquartered asset manager with $70 billion under management. “This has percolated into weakness in the credit markets globally. Yields on Indian credits accordingly have moved higher by about 50-70 bps (basis points).”
A basis point is equal to a hundredth of a percentage point.
The US Federal Reserve’s rate-setting Federal Open Market Committee strongly indicated in a policy statement issued on Wednesday its intent to raise interest rates in the US by March. “With inflation well above 2 per cent and a strong labour market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate,” it said.
“The yields on the 10-year US treasury have risen by 15 basis points in less than two weeks which has resulted in increased volatility and ballooning yields for Indian borrowers,” a banker said on condition of anonymity.
The 10-year US treasury note was trading around 1.83% on Thursday evening.
Several experts and market participants, however, told ET that the impact for Indian issuers would be restricted to a short span of time since investors are in a “risk-on” mode and money flows to emerging markets are likely to continue.
“The Chinese new year is round the corner and investors take a back seat at this time. This could also impact the timing of issuances. However, one can’t discount larger macroeconomic factors at work,” said another executive of a multinational bank, who did not wish to be identified.
Several Indian companies are looking to the international bond markets for their funding needs, following the success of Reliance Industries Limited (RIL) in raising $4 billion through a bond issuance on January 6. It was the largest-ever such issuance from India.
The bonds were issued in three tranches of 10-year securities, 30-year securities and 40-year securities. RIL’s 10-year bond maturing in 2032, which raised $1.5 billion, was priced at 2.875% or 120 basis points above the 10-year US treasury note, which was trading around 1.7% at the time.
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