Oil and Natural Gas Corp. plans to tap the debt market for the first time, an opportunity that may be hard to pass up for bond bulls. India’s largest state-run energy producer may sell bonds and take out loans of as much as $4 billion to pay for the purchase of the government’s $5.2 billion stake in Hindustan Petroleum Corp. and bankroll $4.5 billion of projects, according to company executives with knowledge of the matter.
Given the company’s credit metrics — it has 130 billion rupees ($2 billion) of cash on its books and a long-term rating that’s a notch above the government — the issuance will be bought by investors drawn to one of the world’s fastest growth rates and Prime Minister Narendra Modi’s economic policies.
“The sentiment is positive toward India and because the supply from Indian corporates is limited, there will be demand,” Rishabh Tiwari, a Zurich-based fund manager for emerging market credit at Swiss Life Asset Managers, said in an interview. “ONGC has strong credit fundamentals and the acquisition of HPCL will help it diversify into downstream refining.”