What Observers Are Saying
“There is obviously some risk premium being attached to the sector by international lenders, compared to funding rates for similarly-rated corporates,’’ according to Chetan Joshi, head of debt capital markets at the Indian unit of HSBC Holdings Plc. “The USD loan market has shown an ability to support Indian NBFC
and housing finance company borrowers.’’
“On a fully hedged basis, the borrowing costs for NBFCs would be 25-50 basis points higher than the onshore rates,” according to Ajay Marwaha, London-based head of investment advisory at Sun Global Investments.
For investment-grade companies from India, dollar bond issuance will mainly come from non-bank financial institutions, as their funding conditions onshore have been very tight in the wake of the IL&FS situation, according to Annisa Lee, head of Asia ex-Japan flow credit analysis at Nomura International (HK) Ltd. There’s still not a lot of supply coming from India, so if issuers are willing to pay up, they will be able to print new paper. In terms of the amount of premium they would have to pay, it’s name by name, depending on which sector they focus on, Lee said.
“The ability for most NBFCs to go out and raise money in any meaningful way through domestic capital markets is really quite restricted’’ says Arjun Kapur, head of corporate finance, Sun Global Investments. Most non bank financial institutions would be looking to raise funding from international capital markets, he added.