India as Best-of-Weakest Makes Loan Bankers Tata Hope

  • Four Tata firms sought or are seeking total $2.5 billion loans
  • India Ratings says nation is `like picking best among weakest'

India’s biggest conglomerate is asking loan bankers for almost as much money as global fund managers have pulled from the nation’s stock and bond markets this year.

Tata Communications Ltd., Tata Motors Ltd., Tata Power Co. and Tata Steel Ltd. sought or are seeking to borrow a combined total of about $2.5 billion in syndicated loans. That compares with the $2.7 billion that foreigners have pulled from the nation’s equity and bond markets this year amid an emerging market rout.

Indian firms are looking to syndicated bankers for relief as offshore note sales fell to a six-year low so far in 2016, the rupee suffered the second-biggest loss in Asia and the Sensex stock index slumped 12 percent. Reliance Industries Ltd. is among a pipeline of companies seeking about $6.5 billion in dollar loans after costs plunged to an eight-year low. Borrowers can point to an economy growing at 7 percent annually, the highest among major emerging economies, and a central bank stockpiling foreign reserves.

“With China slowing down, Brazil shrinking and Europe stagnant, choosing India is like picking the best among the weakest,” said Sudarshan Shreenivas, director for corporate ratings at India Ratings & Research. “Growth is still visible.”

Little Choice

Lenders aren’t spoiled for choice. China’s economy is growing at the weakest pace in 25 years, Russia is reeling from the oil price slump and Brazil’s sovereign rating was cut to junk this week by Moody’s Investors Service amid the nation’s worst recession in a century.

The Tata borrowings will be most by the group companies at the start of any year if successful, according to data compiled by Bloomberg. They’re part of group Chairman Cyrus Mistry’s mission to reduce the debt burden across his $109 billion coffee-to-cars conglomerate by either selling assets or refinancing debt at cheaper rates.

Tata Motors’s subsidiary TML Holdings Pte raised a $250 million loan last month that is due to mature in March 2020, said a company spokeswoman. The facility is “currently undergoing syndication with a very strong response,” she said in an e-mail.

Tata Power mandated seven banks for a $460 million loan, people familiar with the matter said this week. Tata Steel began marketing a $1.5 billion facility to lenders in January, people familiar said last month. Tata Power declined to comment beyond exchange filings and an e-mail sent to Tata Steel went unanswered.

Tata Communications got a $250 million loan, people familiar with the matter said last month. The bilateral loan was to refinance or replace old debt without adding fresh debt to the portfolio, and was neither new nor additional, a company spokeswoman said by e-mail. The firm is not looking to raise any long term debt resources from the market, according to the spokeswoman.

Refiner Hindustan Petroleum Corp. scheduled roadshows to market a $465 million refinancing loan, people familiar said Feb. 11. Two calls to a company spokesman went unanswered.

ONGC Videsh Ltd., the overseas unit of the nation’s biggest explorer Oil & Natural Gas Corp., was marketing $1.775 billion loan, people familiar with the matter said Jan. 8. An e-mail to a company spokesman wasn’t immediately returned.

Reliance Industries was inviting banks to join the general syndication for an almost $1 billion dual-currency loan, people in the know said on Jan. 27. A company spokesman couldn’t immediately comment.

Foreign Interest

“Foreign banks are showing an increasing interest in Indian loan syndication markets, especially the Taiwanese and Japanese names,” said Sidharth Rath, Mumbai-based president for treasury, corporate and transaction banking at Axis Bank Ltd. “The market inspires confidence for better-known Indian companies and so margins are more favorable to them.”

The central bank may also provide some comfort. Reserve Bank of India Governor Raghuram Rajan is rebuilding foreign reserves to fight a slide in the rupee and high inflation. The currency stockpile rose $4.3 billion in the three weeks through Feb. 12, the longest run since October, as the rupee flirted with touching a record low this month.

Indian borrowers refinanced a record $11.4 billion of overseas borrowings last year, spurred by average margins on dollar loans falling to 187 basis points more than Libor, the lowest since 2007, according to data compiled by Bloomberg.

Tata companies also took advantage of the cheap financing to raise more than $1 billion of loans last year. That followed almost $2.9 billion of facilities in 2014, the most in a full year for the conglomerate, according to Bloomberg-compiled data.

“The group overall still enjoys a very good reputation versus its Indian peers,” said Pierre Faddoul, head of credit research at Tokio Marine Asset Management International in Singapore. “I don’t necessarily think the fundamental picture or outlook for India has changed much over the past few months.”

(Corrects tense in 2nd paragraph, and to show that Tata Communications got loan.)
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