Window for India dollar bonds cracks open with NTPC issue

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Window for India dollar bonds cracks open with NTPC issue

Indian issuers of overseas bonds, kept on the sidelines by volatile markets, may revive their plans after NTPC Ltd, the country's largest power generator, completed a USD 500 million issue on Thursday that was on hold for weeks.

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Indian issuers of overseas bonds, kept on the sidelines by volatile markets, may revive their plans after NTPC Ltd, the country's largest power generator, completed a USD 500 million issue on Thursday that was on hold for weeks.

The 10-year Reg. S bond, meaning it was open to overseas investors outside the United States, was priced after generating a robust USD 2.7 billion of demand more than a month after the state-controlled firm completed an investor roadshow.

A slew of companies had announced plans, mandated banks or completed investor meetings for possible overseas issues including state-owned Indian Oil Corp , Indian Railway Finance Corp (IRFC) and Rural Electrification Corp .

Private sector companies including Essar Group software services firm Aegis , Ballarpur Industries and Bharti Airtel , India's largest cellular carrier, were also in the process of raising US dollar bond issues.

The offerings were put on hold when market volatility picked up and made investors skittish. The success of the NTPC deal may spur Indian issuers to bring the offerings back to the market.

"As worries about Greece's debt crisis have abated, we are seeing the investor appetite return, with the market getting some stability with the spreads tightening," a senior banker with a foreign institution said on Friday.

Indian companies raised USD 6.6 billion in US dollar bonds overseas in the first half of 2011, compared with USD 2.6 billion in the same period a year earlier, attracted in part by lower yields overseas after India's central bank has raised interest rates 10 times since March 2010.

Anxiety over Greece and the Euro zone sovereign debt crisis put a brake on new issuance in June, with investors shunning risk for safe havens. India failed to complete a single dollar deal last month.

Indian banks, typically the country's most active offshore borrowers, will be slower to return to the market because of softening credit growth, the banker said.

NTPC's dollar bond was the third from Asia's power sector this week, after Hong Kong's CLP Power, a unit of CLP Holdings, and Korea Hydro & Nuclear Power Co completed deals.

The spread on NTPC's new bonds tightened by 10 basis points in the after market, a positive sign for demand.