India Inc mops up record $22 billion via overseas bond sales in 2021

Mumbai: India Inc has raised a record $22 billion in 2021 surpassing the 2019 record of $18.5 billion, helped by easy liquidity, benign global interest rates and a surge in bonds issued for ESG-compliant projects.

This year also saw a wider set of issuers from diverse sectors such as information technology (IT), telecom towers, renewables, as well as rare additional tier-1 (AT1) bonds from HDFC Bank and Axis Bank.

Bharti Airtel's $1.25-billion dual-tranche issues of 10.25 years and a perpetual bond with a 5.25-year call option were the biggest, followed by Vedanta's $1.2-billion, four-year bond. Both were issued in February when the rates were still low but global economic activity had picked up.

Subhrajit Roy, India head, global capital markets at Bank of America (BofA) said both investment grade and lower-rated Indian companies took advantage of the easy liquidity and lower interest rates. BofA-led bond issuances cumulatively raised $7.87 billion in 2021.

Data from Dealogic show that a total of $11.1 billion was issued by so-called high-yield issuers or lower-rated companies compared with $7.4 billion for investment-grade issues.

The issuers included many first-timers namely, Brookfield owned telecom infrastructure company Summit Digitel, Hero group's renewables arm Hero Future Energies and also solar energy company Acme.

There has also been a surge in ESG issuances. Dealogic data showed issues rose eight times to $8.29 billion in 2021 from just $1.37 billion in 2020.

BofA's Roy said ESG issuances have risen, helped by greater awareness among Indian companies and the huge liquidity available globally to be invested in ESG compliant bonds.

"Indian companies are increasingly adhering to ESG norms and have started monitoring their targets with great rigour. The global ESG debt market is advanced and deeper while India is at a nascent stage in tapping this market which means the potential is huge. So there is both demand and supply of ESG bonds which has resulted in the rise in these issuances," Roy said.

Bankers say that changing inflation, rates and liquidity trajectory globally will make it difficult for numbers to be anywhere close to this year.

"2021 saw many first time issuers out of India, including from diverse sectors as well as new products like private sector bank AT1 bonds and bridge to bonds for financial sponsors," said Chetan Joshi, head-debt financing at HSBC India. "This wider issuer and product base bode well for the next year as the universe of offshore debt issuers from India continues to expand. But the risks from any virus resurgence and the changing trajectory of rates could mean the market will be more volatile."