Expect corporates to raise more from $ bonds: Deutsche

Q: What is the in-house reading on what you might expect from the Federal Open Market Committee (FOMC)? Will there be any botheration with debt fund movement in India if tapering is announced?

A: I doubt it will have a significant effect. I think the shock and awe effect that was about to happen as a result of that is already factored in, has happened, the reaction has happened and a lot has passed since then. We have actually seen three different cycles, three different environments in the debt markets already this year. Pre May this year it was an incredibly benign environment, a combination of rates and credit internationally meant that a lot of companies got a chance to address their balance sheet issues, lot of refinancing was done, incredible amount of issuances. We were doing three times more the number of deals that we did last year.

Everything kind of froze, standstill from May till September, a combination of currency volatility in India, and tapering. I think we have seen genuinely a turnaround post October whether it is Indian companies tapping new offshore markets, or attracting old debt investors back into the country, obviously buoyed by FCNR-B funds that have come in helped by the fact that the current account deficit (CAD) looks much better, the currency is more stable, forex reserves are looking better. I am much more positive that we will be able to resist any shock that comes from tapering news this time than we did in May, I think it was much bigger last time.

Q: So they won't even leg out you think, such an outflow itself is not what you expect?

A: A little bit of that will happen, as I said the first knee-jerk reaction is already factored in and since then it has not been a question of if, it has been a question of when and global portfolio managers have had a chance to absorb that. So I am not really worried about a big outflow, it is my personal sense.

On the other hand we have seen some very positive outcomes for Indian corporates tapping into international debt markets. We have seen a euro market issuance, we will see more as Indian companies who have some offshore cash flows as well and so can balance the inflows and outflows much better, expand their investor base and utilise a little bit of goodwill that the Indian name is starting to generate again in the international markets.

Q: Can you give us some numbers, how much have Indian firms actually raised through dollar-denominated bonds, say in the last six-nine months and going ahead since you are not expecting the taper to affect this entire process, how much do you think these Indian firms could tap the overseas markets through bond offerings?

A: I think we have seen a sum total of about USD 8-9 billion into the debt markets overall, it is still lower than where we had expected it to be and a lot of it was due to what happened in the middle part of the year, driven by several factors both internationally and domestically. We have seen a very large issuance go through in the euro market. What we will see as a secular trend in the debt community will be an expansion of markets and types of investors as mark key Indian names which are now well-known internationally to investors tap those markets, get this window of opportunity.

As I see the news around India is turning slowly with every indicator coming out to be better than where it was or where it was expected. I think there is a positive sentiment that is starting to build. It will give us strong momentum. If the election clears through and throws up a good verdict that takes care of the political uncertainty, I think we will be in for a very favourable market condition for the debt markets globally. So fair bit has come, a lot more can come, we are working closely with several corporates and several corporates are now looking at the international markets once again as they were doing in the first five months of the year.