Anil Varma, Bloomberg
Mumbai: Industrial Development Bank of India Ltd, the nation’s seventh biggest by assets, plans to increase its overseas bond sales by 50% to $1.5 billion (Rs6,289 crore) over the coming year to meet credit demand and fund expansion, Deputy Managing Director O.V. Bundellu said.
The bank plans its first bond sale under a medium-term note (MTN) programme in the next few months, Bundellu said in an interview on 18 April. It will decide on the details after it announces today its financial results for the year ended 31 March, he said. The bank initially planned to raise $1 billion under the programme.
India’s banks are expanding overseas to meet demand for financial services from domestic companies that are setting up or acquiring international businesses, and from Indians working abroad. The banks are increasingly borrowing outside India to benefit from lower interest rates and the better availability of money in international markets.
Industrial Development Bank hired HSBC Holdings Plc and Barclays Plc to sell the bonds, which may mature in either five, seven or 10 years, he said. The bank will use part of the proceeds to pay for new offices in Singapore and Bahrain.
“We decided to increase by 50% the size of the MTN programme because domestic demand for credit remains very strong,” Bundellu said.
Industrial Development’s foreign-currency debt is rated Baa2 by Moody’s Investors Service, the second-lowest investment grade, and a level lower at BBB- by Standard & Poor’s, according to data compiled by Bloomberg.
Rising rupee rates make it more attractive for Indian companies to borrow funds abroad. India’s central bank has been increasing interest rates since October 2004 to curb inflation stoked by economic growth. The bank on 30 March raised its overnight lending rate to a 4 1/2-year high of 7.75%.
Six-month dollar-denominated Libor was set at 5.35%, according to data compiled by Bloomberg. The comparable Indian money market rate is 9.45%.
State Bank of India, the country’s biggest, last month increased the total amount it plans to raise through the sale of medium-term notes to $5 billion from $2 billion. Bank of Baroda and UTI Bank Ltd plan to raise overseas debt totaling more than $2.2 billion in the fiscal year that started 1 April.
Industrial Development Banks to list the bonds in Singapore. “We will take the plan to the Singapore exchange after announcing our financial results,” Bundellu said.
Companies have to obtain approval from the Singapore bourse before they sell debt, if they want to list the securities on the exchange.