Indian offshore bond issuance set to rebound
Indian offshore bonds are set for a comeback in 2026, driven by refinancing needs, a narrowing interest rate differential with the US, friendlier regulations, and strong investor appetite for Indian credits.
"We expect the first quarter to be busy for dollar bond deals from India," said Ganeshan Murugaiyan, head of corporate coverage and advisory at BNP Paribas India. "We could see dollar bond supply cross US$10bn in 2026, surpassing 2025 and 2024 levels as the interest rate differential between the US and India narrows, making dollar bonds relatively attractive for issuers."
About US$12bn of US dollar-denominated bonds from India will mature next year, according to LSEG data, suggesting that new issues will comfortably exceed the US$5.6bn raised this year and US$9.7bn registered in 2024.
Indian clean energy developer ReNew Energy Global is said to have mandated Barclays, Deutsche Bank, HSBC, JP Morgan and MUFG for a potential benchmark US dollar bond offering in the first quarter.
Export-Import Bank of India and State Bank of India London branch are also expected to tap the market around the same time.
The issuers did not respond to emails seeking confirmation of the plans.
"Even though some refinancing may happen from the onshore market, issuers that raised dollar bonds three to four years ago are due for maturity and are most likely to tap the dollar bond route," said Manisha Shroff, partner for banking, finance and debt capital markets at law firm Khaitan & Co.
ReNew's Mauritius SPV Diamond II, Exim India, SBI London branch, Delhi International Airport, GMR Hyderabad International Airport, Greenko's Mauritius and Dutch units Greenko Solar and Greenko Dutch BV, Wipro and HDFC Bank GIFT City branch are some of the issuers with US dollar bonds maturing in 2026, according to LSEG Deals Intelligence.
Onshore refinancing
Dollar bond issuance slumped by 42% this year as issuers turned to the buoyant rupee market.
"The breadth and depth of the rupee bond market has developed well," said Murugaiyan at BNP Paribas.
Issuers such as Adani Ports and Special Economic Zone, Delhi International Airport, GMR Hyderabad International Airport and Greenko Group issued rupee bonds this year, partly to meet maturities.
"Most dollar bonds redeemed in the past 12–18 months were refinanced onshore, mainly due to cost," said Abhishek Dangra, a managing director at S&P.
The cost gap was significant. The difference between onshore and offshore funding costs was roughly 100bp for five-year tenors, and as high as 150bp–175bp for 20 to 30-year maturities, with variations depending on the credits and sectors, said Neel Gopalakrishnan, director of fixed income at S&P. The spread includes India's withholding tax and hedging costs.
"With US Treasury [yields] and hedging costs moving lower and the Reserve Bank of India likely done with rate cutting, spreads may narrow. Issuers may tap the offshore market if the rates become attractive," he said.
S&P expects a further 50bp of cuts in the US Fed funds rate in the second half of 2026 following a 25bp rate cut on December 10 to a three-year low of 3.5%–3.75%, while it sees India having hit a terminal repo rate of 5.25% after cumulative cuts of 125bp since December 2024.
Issuers are also awaiting final external commercial borrowing rules after a draft released in October proposed sweeping changes, such as removing the all-in pricing cap, higher borrowing limits, broader eligibility, and simpler end-use restrictions.
"The main factor that restricted issuers from coming to the dollar bond market under the ECB route was the pricing cap; hence, removing the pricing cap and allowing for a market determined pricing itself opens the market to a wider pool of issuers," said Gopalakrishnan.
The ECB pricing ceiling currently is 500bp over the relevant funding benchmark.
"We are seeing increasing interest from various real estate players, lower rated corporates, nonbanking financial companies and infrastructure investment trusts, especially if the ECB rules get relaxed," said Shroff at Khaitan & Co.
GIFT City route
Some companies are exploring issuing through Gujarat International Finance Tec-City, India's offshore financial hub in Gujarat state, due partly to the tax advantages.
ReNew is considering setting up a unit in GIFT City that would issue bonds and on-lend to its Indian subsidiary, according to market sources, though this will depend on regulatory approval. Depending on the structure, treasury centres based in GIFT City would not have to pay withholding tax on interest received from onward lending to Indian companies.
"We could see issuers explore the GIFT City route to raise dollar bonds and hopefully this avenue picks up for Indian issuers in 2026," said Murugaiyan at BNP Paribas.
Renewables and nonbanking financial companies are expected to dominate issuance next year, alongside returning names and new entrants.
"Offshore issuance is going to be more likely from holding structures of renewable companies and those which are highly leveraged where they could be facing limits on domestic borrowing from banks," said Gopalakrishnan at S&P.
"There’s growing interest for issuers with project finance structures as companies get into larger, more complex projects, shifting from pure solar to hybrid and pump storage, which require significantly higher capital outlays,” said Dangra at S&P. “We could see more restricted group structures in the bond market from renewables, data centres and roads sectors and securitisation kind of structures from financial institutions.”
Investor interest in India remains strong.
"There’s huge appetite among offshore investors for Indian paper. It’s the first question we get from international investors: what’s the pipeline? They love the India credit story, but there’s just not enough supply," said Gopalakrishnan.
“With potential opening up of regulations and scarcity of Indian paper, market fundamentals for international issuance from India are quite strong,” said Sameer Gupta, head of South Asia DCM at Deutsche Bank, who is cautiously optimistic on dollar supply.