InvestorQ : Do you think Indian companies will be able to raise global bonds after the high fiscal deficit?
prachi Patwardhan made post

Do you think Indian companies will be able to raise global bonds after the high fiscal deficit?

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sara Kunju answered.
3 weeks ago
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Your question is an important one as it raises a big issue facing a lot of global bond issuers. Will the sharply higher fiscal deficit raise the hackles of bond investors and will they give a tepid response? Will debt investors be apprehensive about a possible downgrade by the sovereign rating agencies? These are important questions.

However, these concerns have not dissuaded 4 companies from going ahead with their global bond issues. These companies include IRFC, Continuum Green Energy, IRB Infra and ReNew Power. These four companies, between them, will raise close to $2 billion from the global market via overseas bond sales in the coming weeks.

From a medium to long term perspective, the appetite among global investor groups will be critical as the Budget has already announced a steep 9.5% fiscal deficit for current fiscal year 2020-21 and 6.8% for next fiscal year 2021-22. In fact, fiscal deficit is slated to reach 4.5% only by fiscal year 2025-26.

This should ideally weigh on future inflation expectations and rising yields have been negative for bond prices, and therefore for bond investors. IRFC plans to raise $750 million via 10-year and 30-year bonds simultaneously. The mark-up over LIBOR is expected at 170-230 bps. Continuum will raise $560 million, ReNew $460 million and IRB $300 million.

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