Sun Pharmaceutical Industries is planning to raise around Rs 10,000 crore through a rupee-denominated debt sale to partly refinance a bridge loan taken to fund its acquisition of US healthcare company Organon & Co., according to three people familiar with the matter, Reuters reported on Tuesday. The proposed fundraising comes as Indian companies increasingly turn to the domestic debt market amid higher global borrowing costs and elevated US Treasury yields.
India's largest drugmaker by market capitalisation is expected to sell bonds with maturities of two, three and four years, according to the report. The fundraising is expected to partly fund the refinancing of a near-$12 billion, 18-month bridge loan that Sun Pharma arranged earlier this year for the Organon acquisition.
The bridge loan was syndicated among a group of lenders, including State Bank of India, the country's largest lender by assets, the report added. Bridge financing is generally used to provide short-term funding for an acquisition, with companies subsequently replacing it with longer-term debt or other permanent financing.
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The proposed bond sale comes at a time when global borrowing costs remain elevated. The 10-year US Treasury yield is hovering around its highest level since mid-June 2007, increasing the cost of dollar-denominated funding for companies. As a result, Indian companies are increasingly exploring the domestic debt market to meet their funding requirements.
One of the sources told Reuters that a total domestic corporate debt issuance in India could reach a record this year as higher US yields make overseas borrowing more expensive. The Sun Pharma transaction would add to the growing pipeline of rupee-denominated corporate bond issuances.
The planned fundraising also comes as Indian companies seek to lock in borrowing costs ahead of the possibility of a rate hike by the Reserve Bank of India. Around $3 billion worth of rupee debt issuances are lined up over the next few days, according to the sources cited by Reuters.
For Sun Pharma, the proposed bond sale would provide a portion of the longer-term financing needed to replace its acquisition-related bridge funding, while also reducing reliance on more expensive dollar funding.
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