Mumbai: International bond sales by Indian companies have slumped 59 per cent in 2012, seven times faster than China's decline.
Treasurers sold $2.5 billion (Dh9.18 billion) in debt, compared with $6.1 billion a year earlier, according to data compiled by Bloomberg.
Indian Overseas Bank is waiting for costs to drop before raising $500 million, Chairman M. Narendra said. The extra yield for the nation's dollar-denominated securities over treasuries rose to a three-month high of 516 basis points on Tuesday, according to HSBC Holdings indexes.
Similar spreads are 268 basis points for South Korea and 449 basis points for China. The slide in dollar fundraising, after a record $11.2 billion of issuance in 2010, is starving companies of funds needed for expansion as accelerating inflation lifts rupee borrowing costs.
Morgan Stanley cut India's economic growth forecast for 2012 to 6.3 per cent from 6.9 per cent on Monday, partly reflecting a drop in private investment.
It isn't a good environment for issuers to sell bonds at this moment due to the growing risk premium stemming from Europe's debt crisis," Kenichiro Ikezawa, a Tokyo-based fund manager at Daiwa SB Investments that oversees about $59 billion, said last week.
"On top of that, India seems to have additional problems such as inflation, making it hard to attract investors."
Global bond sales by Indian companies and the rupee fell for a third month in May, with companies raising $16 million after borrowing $124 million in April.
Non-yuan bond sales by Chinese companies fell 8.5 per cent to $14 billion this year, according to data compiled by Bloomberg.
The rupee lost 3.9 per cent this month and touched a record low of 55.06 per dollar on Monday, the worst performance among Asia's 11 most-traded currencies.
It traded 0.4 per cent higher at 54.816 per dollar Tuesday in Mumbai.
Among the other biggest emerging markets, Brazil's real has slumped 7.6 per cent, Russia's ruble 5.4 per cent and China's yuan has fallen 0.7 per cent.
Local-currency debt sales, too, are tumbling as concern inflation is accelerating drives up bond yields.
Companies raised Rs43 billion (Dh2.81 billion) from selling rupee-denominated debt, compared with Rs105 billion last month. Wholesale prices rose 7.23 per cent in April after increasing 6.89 per cent in March, government data showed this month.
State-run Indian Overseas Bank, based in the southern Indian city of Chennai, has been biding time for four months now to sell dollar-denominated notes.
"The gap between what issuers can pay and what investors can commit has been widening, and as a result issuance is declining," Narendra, who is also the bank's managing director, said last week.
"Both the issuers and borrowers are affected by what is happening globally and India's domestic economy."
Foreign-currency bond sales will revive as emerging-market price swings subside "before long", according to state-run IDBI Bank Ltd, which raised $120 million in March by selling three-year bonds denominated in Swiss francs.
The rupee's three-month implied volatility was little changed at 13.25 per cent Tuesday, according to data compiled by Bloomberg.