Highest Relative Yields Since 2009 Spoil Company Debt Sales: India Credit

Indian companies are finding it too expensive to sell local-currency bonds after central bank Governor Duvvuri Subbarao raised interest rates seven times in a year, spurring relative yields to the highest level since October 2009. Rupee bond offerings plunged 95 percent to 1 billion rupees ($22 million) in the week ended Feb. 4, from 21 billion rupees in the same period last year, according to data compiled by Bloomberg. January sales were the lowest for 15 months as Subbarao increased the repurchase rate to a two-year high of 6.5 percent, forecasting wholesale-price inflation may rise to 7 percent by March 31 from a prior 5.5 percent estimate. "The current rate environment doesn´t give much confidence to long-term investors," Suresh M. Hegde, group finance head at Videocon Industries Ltd., India´s biggest consumer electronics maker, said in a phone interview yesterday. "They´ll wait till inflation is under control and rates start to soften." Bond sales jumped to a record 1.94 trillion rupees last year as borrowers raised money to finance airports, power plants and roads in Asia´s third-largest economy. The difference between yields on top-rated Indian five-year company bonds and similar-maturity government debt has since widened to 122 basis points, or 1.22 percentage point, the most since it reached 131 basis points on Oct. 9, 2009. The spread is 76 more than last year´s low, amid speculation Subbarao will need to raise rates further.