Indian companies have raised $2.12 billion overseas in the current financial year so far, a seven-year record. The last time they raised a bigger sum in overseas markets was in 1997-98 at $2.338 billion. In 1996-97, they raised $3.084 billion.
The data, sourced from market monitoring agency Prime Database, include amounts raised through equity, convertible bonds and plain bonds. Investment bankers said Indian companies had been opting for overseas issues this year in a big way.
However, the composition of the instruments being tapped has changed. While equity was the undoubted instrument of choice in the past few years, with the amount raised through equity instruments peaking at $1.119 billion in 1999-2000, convertible bonds seem to be the flavour this year.
Indian companies have raised over $1.31 billion through convertible bonds in the current financial year so far. Incidentally, 23 issues have already hit the overseas market this year against 18 in 1997-98 and 25 in 1996-97.
Merchant bankers said the main reason for the shift from equity issues to convertible bonds was that issuers wanted to lock themselves into the record low interest rates globally this year.
"Additionally, to provide a level of comfort to investors, issuers have to add the equity conversion bit into the bonds," a merchant banker said. The head of offshore issues at a foreign investment bank said issuers could protect the downside risk of floats by sticking to a set coupon debt in the early years, and shifting to equity only when the cash flow had stabilised.
The limited documentation required in convertible bonds, at least at issue time, is also an advantage.
Merchant bankers added that Indian regulations prohibited issuers with outstanding convertible bonds in India from floating equity issues domestically, but this constraint did not apply to outstanding convertible bonds abroad.
© 2025