The limited deal activity in overseas loan syndications from India, especially from the private sector, has left bankers hungry for more. Volumes in the first half were at their lowest since 2006, totalling just $5.7bn, and plummeting 66% from the $17bn clocked up in the same period in 2014, according to a Dealogic report published on July 10.
But uninspiring as the numbers may seem, things can only get better from here, market participants said.
Although a number of state owned Indian companies have hit the market for refinancings in recent months, the same cannot be said for privately owned Indian corporates. Asian banks are swimming in liquidity and eager to fund top rated names in India. Bankers are therefore focusing their on convincing clients to come to market while that remains the case.
“If I were a treasurer, I’ll be refinancing before the end of the year,” said a Singapore based syndicator. “If you compare where pricing is versus where it was a year, or a year and a half ago, they [Indian corporates] could stand to save 50bp-100bp per annum, which, over five years is pretty substantial.”
Industry peers echoed his sentiment. Margins of 250bp and lower are now available to Indian corporates even outside the top league of names like Tata and Reliance. Such companies would have been looking to pay more than 300bp just a year earlier, said an Indian banker. And the prevailing conditions mean they can also look to stretch tenors, he added.
Refinancings ramping up
One reason behind the expectations of a pick-up is simply the passage of time. Indian companies generally become more active in the third quarter of the calendar year, as their financial year begins in April.
“It took time for [Indian corporates] to get confidence to do deals,” said a banker who arranges Indian loans. “Now we’re into the second quarter in India and companies have more clarity in terms of their financing needs. We are going to see more refinancings and repricings.”
These refinancings have begun to trickle through. Biocon, India’s largest pharmaceutical company, is looking to refinance a loan taken by its Malaysian arm, in addition to raising some money for capital expenditure. It has mandated Standard Chartered for the $200m borrowing. It is paying around 250bp-275bp for the loan, which has an average life of five years and door-to-door life of seven years.
Meanwhile, Manipal Group, which has interests in healthcare and education, has also started seeking banks for a refinancing of around $70m. ICICI Bank is leading that deal, said bankers away from the trade.
Bankers broadly saw refinancings by lesser known corporates offering all-ins in the 250bp-350bp range for five year liquidity.
Safe as houses
Another sector generating business is the housing finance sector in India, which enjoys a more relaxed regulatory environment for raising debt than some others. Housing Development Finance Corp, the most prominent player in the sector in India, has already wrapped up offshore fundraisings totalling $800m.
Dewan Housing Finance, another company in that sector, has also approached the market for $110m five year loan that pays a margin of 225bp. Barclays is sounding out banks for this transaction (see separate story).
“We think those [housing finance] companies may take advantage of the current market,” said a banker at an Indian lender. “Among the larger ones, HDFC has already come, Dewan Housing is also fairly decent in terms of size, LIC Housing Finance is another big name.”
Yet while lenders are keen to get their hands on more Indian assets, the lack of activity this year is not expected to create borrowing opportunities for all levels of credit. Banks are not yet scrambling to fund smaller, less familiar names, said the banker at the Indian lender.
“As an overall trend, I don’t think many banks are actively seeking out midcaps. I think those are more one-offs,” he said. Overseas financings remain the preserve of select companies, mostly in the investment grade bracket that have been banking with non-Indian banks, said a Mumbai based banker.