Companies seek to lock in borrowing costs as markets weigh the possibility of an October interest-rate increase
Indian companies are preparing around US$3 billion in rupee-denominated bond issues over the coming days as borrowers seek to secure financing costs before a potentially tighter monetary policy environment.
Large conglomerates, state-owned companies, infrastructure investment trusts and non-bank financial companies are together planning at least Rs 290 billion (about US$3.02 billion) in debt sales ahead of the Reserve Bank of India’s monetary policy decision on October 7.
Among the major borrowers are Reliance Industries, Vedanta, Delhi International Airport, Adani Airport Holdings and JSW Energy, which are looking to raise a combined Rs 185 billion. Infrastructure-focused entities Cube Highways Trust, Interise Trust and India Infradebt are also planning to raise about Rs 60 billion.
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The rush comes as expectations of higher interest rates have increased in recent weeks
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Market participants are increasingly anticipating that the RBI could raise its policy rate in October, which would be its first rate increase since February 2023 if it goes ahead
Akshay Naik, India head of debt capital markets at Citibank, said companies that expect rupee interest rates to rise further are moving to lock in current borrowing costs. He also said large and highly rated issuers were expected to find sufficient investor demand.
The policy outlook has become more uncertain amid higher inflation, elevated oil prices and interest-rate moves by major global central banks, including the US Federal Reserve. Several foreign banks, including Citi and Deutsche Bank, have reportedly brought forward their expectations for an RBI rate increase from December to October.
The RBI has also been withdrawing excess liquidity from the banking system. Recent bond sales and other liquidity-management measures have reduced the surplus substantially, while market participants continue to assess the implications for borrowing costs.
Despite the expected increase in bond supply, market participants say banking-system liquidity remains sufficient to absorb the planned issuances.
