Essel Group, the conglomerate with business interests in media, packaging and infrastructure, is looking to raise up to $1 billion by issuing dollar-denominated bonds, said two people aware of the development.
The funds will be used to refinance debt of the group’s Mauritius holding company, which has investments across multiple businesses.
“Essel is exploring a bond issuance to refinance the offshore debt of its Mauritius entity, through which the group has investments in its businesses. The Mauritius entity currently has debt of around $800 million on its balance sheet. Essel is likely to raise as much as a billion dollars to refinance this debt,” said one of the two persons cited above, requesting anonymity as the talks are private.
According to the second person, most of the proceeds of the proposed bond sale will go towards refinancing debt for the infrastructure business that has interests in roads and renewable power.
“Around $500-550 million of the debt has been used for investments in the infra businesses. Hence, the majority of the bond sale will go towards refinancing that debt,” he said. He too requested anonymity.
Low interest rates and an abundance of liquidity in the market are the reasons behind the group looking at refinancing its debt, the second person said. “They have been in discussions with banks for a couple of months. However, the final size of the offering and the launch timelines are yet to be decided,” he added.
“The data is incorrect and there are no such plans,” said a spokesperson for Essel Group in an emailed response to queries on the reported plans.
The offshore refinancing market has seen significant activity in the last two years and several Indian companies have tapped the opportunity provided by low interest rates, high liquidity and improving domestic macroeconomic factors to refinance debt.
Earlier this month, Hyderabad-based renewable energy firm Greenko Group raised $1 billion through green bonds, the largest such issue so far in Asia. The company plans to use the funds to refinance $500 million in bonds issued in 2014 as well as for refinancing debt acquired through the 2016 acquisition of now bankrupt American renewable energy firm SunEdison’s solar assets in India.
Another renewable energy firm ReNew Power Ventures Pvt. Ltd raised around $500 million through bonds earlier in the year to refinance debt. In January, Vedanta Resources Plc, the London-based mining and metals company of billionaire Anil Agarwal, raised $1 billion by selling bonds to refinance its near-term debt obligations, Mint reported. Vedanta used the proceeds to buy back part of two series of bonds maturing in 2018 and 2019. Vedanta bought back close to $800 million worth of bonds.
In 2016, several Indian companies such as Glenmark pharmaceuticals and Adani Transmission Ltd raised dollar bonds in the overseas market.
Indian companies have also been tapping the bond markets through so-called masala bonds—rupee-denominated offshore bonds.
Companies such as Housing Development Finance Corp. Ltd and state-owned power producer NTPC Ltd raised Rs3,300 crore and Rs2,000 crore through masala bonds earlier this year.