Mumbai: Axis Bank is considering to raise 1 billion Malaysian ringgits (Rs1,276 crore, $315 million) through bonds in 2008, two sources familiar with the development said on Thursday.
One source said Axis could issue the first tranche of 500 million ringgits in coming months, depending on market conditions.
State Bank of India sold bonds worth 500 million Malaysian ringgits earlier this week, the first Indian bank to do so. The state-run bank sold the 5-year bonds at a coupon of 4.90%, a source with knowledge of the deal said.
“The pricing was at less than 200 basis points over the six-month dollar Libor (London Overnight Interbank Rate),” he said, adding the issue was fully subscribed.
The source said insurance companies took 47% of the bonds, asset managers and pension funds 43%, and banks got 10%.
The Indian interest in Malaysia, which has one of the most active local corporate bond markets in Asia, comes as issuers are looking at countries perceived to be more insulated from a slowdown in the global economy.
“What we have seen in Malaysia is a market which has shown quite a lot of resilience in the face of the global volatility,” said Richard Grainger, head of debt capital markets with Barclays Capital in Hong Kong.
Low interest rates and the ringgit’s strength are important factors as well, as offshore issuers seek to diversify their funding at a time of dollar weakness, as well as being cheaper to swap the money raised into their domestic currencies.
“While the dollar market has been a happy home for Indian banks over the past few years in terms of their debt issuances, the market has all but closed,” Grainger said.
“Not because investors aren’t there or don’t want to buy. They are there and they do (want to buy). But the yields they are demanding are simply too high for the Indian banks to be able to issue profitably,” he said.