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An increasing number of infrastructure companies in India are looking to raise debt in the international markets for project financing as overseas investors find greater comfort with Indian issuers across sectors and ratings.

Companies are raising money for capital expenditure and refinancing loans taken from domestic lenders and replacing them with longer tenor debt. IRB Infrastructure, GMR’s Hyderabad Airport and Delhi International Airport and JSW Hydro Energy are among companies that have tapped the market with project financing bonds this year.

“This year, the big focus for us has been on project financing bonds. We’ve done a couple of them, where structurally, we have now started getting Indian project financing, given the fact that outside of the public sector banks, there aren’t specialized project financing institutions in the market. So we’ve taken them to the global investor base," said Rahul Chawla, co-head, investment banking coverage at Deutsche Bank.

Chawla noted that the trend is still emerging but presents a major opportunity for Indian companies.

“Given the size and given the scope that is available, it is yet nascent, but especially when you look at the green energy sector, now the market receptibility has been set. So, very early-stage project companies may not be able to tap if they won’t get the right rating, but when you get into the double B’s, the risk-return trade-off that both the investor and the issuers look for starts becoming more balanced," said Chawla.

“The activity is largely on the renewable side right now, but whether it is the road sector or certain other infra-related assets, I think we are ready for the market to be receptive to that industry as well. On the tenor, for investment-grade issuers, which are few and far between at the moment, it can set to 10 years as well, but I think seven years is now something the market is not shy of accepting and delivering," said Chawla.

Continuum Green Energy’s $561 million bond offering and Acme’s $334 million bond sale were some of the project financing debt deals from the renewable sector this year.

To be sure, even as 2021 has been a good year for Indian issuers in the offshore debt capital markets, the market has considerably slowed down in the last quarter of the year due to global macroeconomic concerns.

“The Evergrande episode in China and the US Fed taper talk have meant that the high-grade market has seen a major slowdown in recent times. While there are some deals in the works, we expect these to only launch in early 2022 once yields in the secondary market calm down and investors become comfortable again to bet on high yield offerings from emerging markets, including India," a Mumbai-based investment banker said on condition of anonymity.

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