India's Sun Pharmaceutical Industries is planning to raise around ₹10,000 crore ($1.04 billion) via a rupee-denominated debt sale to partly fund a bridge loan it took to acquire US healthcare firm Organon & Co., according to Reuters reports. The country's largest drugmaker by market capitalisation will sell shorter-duration bonds with maturities of two, three and four years as part of this refinancing strategy. As per Reuters, the proposed fundraising comes as Indian companies increasingly turn to the domestic debt market amid higher global borrowing costs and elevated US Treasury yields.
The bridge loan was a near-$12 billion, 18-month facility that Sun Pharma closed earlier this year for the Organon acquisition, as reported by Reuters. The syndication included State Bank of India, the country's largest lender by assets, demonstrating the scale of financing required for the major healthcare deal. Bridge loans are typically short-term loans taken before acquisitions to provide financing for the deal, which can later be replaced with more permanent funding via bonds or loans. The fundraising is expected to partly fund the refinancing of this acquisition-related bridge funding.
According to Reuters, a total domestic corporate debt issuance in India could reach a record this year as higher US yields make overseas borrowing more expensive. The 10-year US Treasury yield is hovering around its highest level since mid-June 2007, which has put pressure on global borrowing costs. This trend is encouraging Indian companies to lock in borrowing costs ahead of a potential rate hike by the Reserve Bank of India, with around $3 billion worth of rupee debt issuances lined up over the next few days. The Sun Pharma transaction would add to the growing pipeline of rupee-denominated corporate bond issuances.
As reported by Reuters, the move comes as Indian companies have been trying to lock in borrowing costs ahead of a potential rate hike by the Reserve Bank of India. 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. The ₹10,000 crore debt sale represents Sun Pharma's strategic approach to refinance its bridge loan obligations through the more cost-effective domestic rupee market, particularly as higher US yields make dollar funding costlier for Indian corporations.
