Indian companies have significantly increased their US dollar borrowings in overseas markets this year, driven by favorable global interest rates and improved investor sentiment. Dollar bond issuance by Indian companies reached an estimated $12 billion in 2024, double the amount raised in the previous year.
This surge in overseas borrowing comes as the US Federal Reserve has begun easing interest rates, making dollar-denominated debt more attractive compared to higher-cost local financing options. However, despite the increased activity, issuance levels remain below the record $22 billion raised in 2021, as high treasury yields continue to deter some large corporate borrowers.
Banks, including SBI and HDFC Bank, led the rebound in dollar bond issuance, along with private sector companies like Vedanta and Biocon, and several non-banking financial companies (NBFCs). SBI achieved a record-low spread for an Indian financial institution on its recent $500 million bond issuance.
Factors Driving Overseas Borrowings
Indian companies primarily consider the overall cost in rupees, including hedging costs, when deciding to raise capital overseas. As long as the landed cost remains competitive and global interest rates remain favorable, Indian companies, particularly NBFCs and infrastructure players, are expected to continue tapping international markets.
The Federal Reserve’s shift towards easing interest rates has created a more conducive environment for overseas borrowings. While domestic rupee liquidity remains strong, offshore markets offer attractive rates for specific financing needs, such as refinancing existing debt or funding acquisitions.
Outlook for 2025
The outlook for overseas dollar borrowings in 2025 remains positive, with expectations of continued momentum. However, potential shocks like unexpected rate hikes or inflation spikes in the US could dampen investor appetite.
The return of sovereign-linked corporates and larger borrowers to the market, along with further easing of US treasury rates, could further boost issuance levels in 2025. Currently, there is strong demand from both domestic and international investors for Indian credits, creating a favorable environment for companies seeking to raise capital overseas.