Russia-Ukraine conflict triggers delay in fund-raisings offshore and onshore

Fund-raising by local companies and banks, either through domestic equity sales or bond/loan issues overseas, will likely be delayed due to the volatility in global financial markets in the aftermath of the Ukraine crisis.


This week is crucial in deciding the timelines for local companies seeking funds, several market participants told ET, as the world seeks a diplomatic solution to the conflict in Europe’s bread basket.


“I expect no rush of issuances until stability emerges,” said Pramod Kumar, Head - Investment Banking, Barclays Bank India. “Given the nature of the situation and ramifications it can possibly have, investors are extremely cautious and watchful right now. When the markets do settle down, there will be a bid for Indian credit, given (their) strong fundamentals.”

Mumbai International Airport (MIAL) and Indian Railway Finance Corporation (IRFC) are among some of the local companies seeking to raise global money via loans or bonds in the range of $500-$1 billion each, sources said.

Bank of Maharashtra has already deferred its share sale even after securing firm commitments from investors. A steel company seeking to raise up to $400 million in offshore bilateral/club loans is also going slow.

"The market is highly volatile and we don't have any urgency to raise funds as our capital adequacy ratio is comfortable. Most probably, we may do it in the next quarter," Bank of Maharashtra Managing Director AS Rajeev told ET.

Potential offshore borrowers did not respond to ET’s queries.

To be sure, most funds have seen no outflow pressures yet while cash levels remain high in the region of 8-12% plus, Barclays estimates showed.

“New issuances have significantly dropped after the Ukraine-Russia conflict," said Rahul Banerjee, founder at BondEvalue, a Singapore-based exchange. "Yields are rising, making it expensive for an emerging market issuer. Indian companies, although relatively resilient, may be in the first lot that will tap offshore markets after geo-political tensions recede," he said.

Last week, the US Treasury benchmark, a key gauge for pricing global bonds, yielded as much as 2.02 percent, about 22 basis points higher than it did a month ago. It, however, pared some of its losses to yield 1.92 percent Monday after reports of Ukraine-Russia truce talks.

One basis point is 0.01%.

The dollar-denominated London Overnight Borrowing Rate (LIBOR) with three-month maturity yielded 20 basis points higher at 0.52 percent in a month. Secured Overnight Financing Rate (SOFR), a gauge that came into effect this year, rose to 0.05 percent versus 0.04 percent at the beginning of February.

"From the financial sector, many small to mid-sized issuances are lined up," said Mukul Kochhar, head of institutional equity at Investec. "Simmering Geo-political tension has triggered volatility in the local equity market, which may result in some delay, as desired valuations may not be achieved right now,” he said.

Bank of Maharashtra was looking to raise up to Rs 750 crore in a share sale.

Half-a-dozen entities in the small finance bank and microfinance space that had struggled to raise equities even during the IPO boom in the second half of last year could face fresh challenges in raising capital.

Among small finance banks, ESAF, Jana, Fincare and Utkarsh were seeking to raise funds through share sales.