International credit markets are opening up for Indian project financing

Edited excerpt:

Question: What is the driving factor behind strong fundraising in the overseas bond market by Indian issuers over the years?

Chawla: Over the years, we have seen the DCM (debt capital markets) business come to maturity from being perceived as an opportunistic market, with issuers reaching out to the market for pricing benefits, where we see That issuers are actively exploring this market. ,

Indian issuers have greater acceptance in the high-yield market, both in terms of paper quality and the variety of paper-issuing industries. And I base this on the fact that in 2021, we’ve taken to market six debut issuers compared to just one in 2014. The market is accepting new issuers for the quality it brings and the diversification that gives it an investor base.

Q: What are some emerging trends in this market that we have seen in 2021?

Chawla: This year, the biggest focus for us has been on project financing bonds. We have done some of those, where structurally we have now started getting Indian project financing, given the fact that there are no specialized project financing institutions in the market outside public sector banks. So we have taken them on a global investor base. We have structured deals that have an amortization schedule that can protect investors well even in a stress scenario, as well as being able to use the extra cash for sponsors to be able to use performance indicators for themselves. encourages for. Completion of base case estimates.

Given the size and the available scope, it is still nascent, but especially when you look at the green energy sector, the market receptivity has now been determined. So, very early stage project companies may not be able to tap if they don’t get the right ratings, but when you get into the double B’s you know the risk return trade that both the investor and the issuer are looking for, start forming. becomes more balanced.

Currently, the activity is largely on the renewable side, but be it the road sector or some other infrastructure related assets, I think we are poised for the market to be receptive to that industry as well. On duration, for investment grade issuers, which are few and far between at the moment, it could even be set to 10 years, but I think seven years is now something the market is not shy about accepting and distributing .

> We have seen some convertible bond offerings this year. Are such devices making a comeback?

Chawla: It’s an interesting thing that we’re starting to think about and we want to play around with commodity players in particular, to think about a convertible bond structure in this environment. If the straight bond DCM high return business remains muted due to taper and market uncertainty. So looking at this and the way the equity market is operating in India, we think it is appropriate to look at convertible structures for certain industries like commodity or heavy industries.

Q. M&A and buyout activity has been strong this year. Is this creating huge opportunities for leveraged financing for investment banks?

Chawla: Another area in the debt market that has seen strong activity is bridge to bonds where we have focused a lot on our part not only with financial sponsors but also with Indian corporate sponsors. We have worked with some of the biggest players to help them acquire companies. So we’ve helped these acquirers with a bridge loan and then they can access the market, either the capital market or a more permanent bank financing structure, once the assets are acquired, accumulated and assimilated. We have been involved in many deals and continue to make a mark in this business as well.