Mumbai: With domestic interest rates remaining high and the Reserve Bank opening up more avenues to raise foreign funds, companies are likely to tap offshore market to raise funds, especially the debt route, British brokerage RBS said today.
So far in 2013, domestic companies have raised over USD 15 billion overseas through debt issuances as against USD 10 billion they raised previous entire year.
“In recent months you have seen RBI being very flexible and open in terms of allowing more companies to look at offshore issuances, in terms of tweaking or relaxing the guidelines,” Manmohan Singh, managing director, debt capital markets at RBS told reporters.
He said the first instance was when the central bank allowed oil companies to do funding for long-term working capital and the second was when it had eased external commercial borrowing (ECB) norms for infrastructure companies.
“Recently, the RBI have allowed infrastructure companies to potentially use short tenor ECBs to fund equity contribution to the special purpose vehicle (SPVs)... which means it opens up other avenues for such companies to look at offshore issues that may lead to new deals coming into the market,” he said.
However, Singh did not put a number or target to the likely issuances in the immediate future. Singh said he expects to see significant refinancing transactions from domestic companies going forward in 2014, which would help these companies reduce their overall cost of funds and adding tenor thereby further balance sheet strengthening.
He also said banks, to meet their Basel III capital requirement, will try to raise more capital through debt instruments in international markets. “A few banks have started looking at offshore markets to do additional tier-I transactions.
We are engaged with a number of them as potential issuers...and also with RBI in terms of structuring suitable instruments that can be successfully placed with the market. So, you could see some transactions of this kind soon,” Singh added. He further said the domestic interest rates are likely to come down in the first half of 2014, as inflation eases, which may lead to another organic expansion and market for multiple products.
