International bonds over Domestic bonds in India

This project studies the preference of International bonds over Domestic bonds in India. This
study also contains, Why bonds are more preferred then bank loans, Comparison of US and
Singapore bond market, Differences among bond market.

This project has been done during summer internship under the guidance of
Mr. P. R Sreenivasan (Vice President-Corp.Finance (Debt)) at GMR GROUP Finance head
office Mumbai.
For this study first of all I have studied about all types of bonds, then I did a comparative study
on pros and cons of both domestic and international bonds, after that how a bond is rated and
how they are listed in different stock exchanges. I also did a research on which stock exchange is
better for Indian bond market NYSE or SGX.
This study is majorly data centred where a large amount of data which has been taken from
various authenticated sources has been analysed in order to reach the objective of the study.
To go through the study I was given an offering memorandum of US$300,000,000 of GMR
hyderabad airport terminal 3 construction as well as permit to run the airport.

Entire study has been divided into 5 parts:-

 Why bonds are more preferred then bank loans

 Preference of International bonds then domestic bonds in India
 Comparison of US and Singapore bond market
 Differences among bond market
 Bond Instruments

This study has been done for specific purpose which will help Corporate debt. department of
the company in important decision making process related to huge funding’s.

 OBJECTIVE OF STUDY:-
i. To understand where GMR should go for domestic or international bonds for its
future projects.
ii. To understand that what will be better for the company Bank loans or Bonds.
iii. To understand which bond market is better for Indian company between NYSE
and SGX
iv. To understand different bond instruments.
 STUDY METHODOLOGY:-
With the help of Secondary data ,some statistical analysis and from different
research papers I did a deep impact study of international bonds and different
bond market. The study is descriptive in nature .

 FINDINGS OF THE STUDY:-

(1) The coupon rates of International bonds are very low as compared to domestic
bonds
o Domestic bonds have coupon rates nearby 12%
o International bonds have coupon rates nearby 4%
(2) There is a inflation risk in International bonds but for that purpose also hedging
is an effective option .
o Hedging rate is approx. 4%
o So adding up the coupon rate as well as hedging charges it turns nearby
8% which is still lower then coupon rates of international bonds and the
difference of 4% is much high when it is a huge sum of money.
(3) Bank loan or Bonds
o companies can borrow from banks, but issuing bonds is often a
more attractive proposition. The interest rate companies pay bond
investors is often less than the interest rate they would be required
to pay to obtain a bank loan
o Issuing bonds also gives companies significantly greater freedom
to operate as they see fit because it releases them from the
restrictions that are often attached to bank loans. Consider, for
example, that lenders often require companies to agree to a
variety of limitations, such as not issuing more debt or not making
corporate acquisitions until their loans are repaid in full.
(4) NYSE or SGX
o In comparing both NYSE and SGX , SGX is more comfortable bond
market than NYSE, this is because Indian bond market and Singapore
market follow the same traits and have a similar kind of market, and in
SXG the Asian companies are benefited by several benefits than NYSE
listed companies.