Indian companies offering high yields may find few takers

MUMBAI: Indian companies offering high yields while borrowing overseas may find few takers after such bonds issued by software company Rolta tumbled on allegations that it misrepresented facts.

“Traditionally, hedge fund managers take bets on high-yield bonds at the cost of higher risk. They now might be in an advantageous position to bargain for further higher rate in new issuances,” said an executive from a foreign bank who did not want to be identified.

California-based short-seller Glaucus Research Group came out with a scathing report on Rolta last week, accusing the company of fabricating financials. Rolta later came out with a report rebutting all the charges.

“We are evaluating legal options. Those reports are baseless and we have come out with a detailed rebuttal,” Hiranya Ashar, joint MD of international operations and group CFO of Rolta told ET.

Companies that have issued high-yield or junk bonds overseas include Century Ltd, which offered a coupon as high as 10.25% to raise $175 million in November, Essar Steel at 9.5% for $375 million and Greenko Dutch BV at 8% for $550 million.

So far this year, Lodha Developers International mopped up $200 million at 12% although it reduced the size of its offshore bond issue from $350 million due to a tepid response from investors.

However, Reliance Industries, rated BBB+ -- a notch above the lowest investment grade -- raised $1 billion by selling offshore bonds at 4.125% with a 10-year maturity this year. Final pricing was derived after adding about 240 basis points over and above the 10-year US Treasury bond yield. Initially, investment bankers had expected a 265 bps spread.

The Glaucus report had triggered a selloff in both Rolta bonds and shares. Between April 14 and 17, Rolta (Rolta Americas LLC) bond yields shot up to 13.74% from 9.12%. The securities are due to mature in July 24, 2019, and offer a coupon of 8.875%.