The increased interest, visible in strong subscriptions for issues this year, is likely to push up offshore bond fund raising by Indian firms after it hit a 14-year low in 2023.

"We expect there to be $15 to $20 billion in India dollar denominated bonds in 2024, which is close to the record-breaking years we have seen in the past," Rishi Jalan, head of Asia-Pacific debt syndicate at Citigroup said.

"We could expect around 30% to 35% of that volume to be high yield."

Indian companies sold a record $21 billion dollar bonds in 2019, according to LSEG data.

High-yield issuers such as Delhi International Airport, which runs the main airport in India's capital, renewable power firms Greenko and SAEL, and Oravel Stays - the promoter of hospitality startup OYO - are among the firms in early talks to issue dollar bonds, four bankers said.

Financial sector firms Indiabulls Housing Finance and Shriram Finance are also in talks, these bankers said.

While discussions are at early stages, these companies may begin by raising $300 million-$500 million each, with proceeds in most cases likely to be used to refinance debt.

The companies did not immediately respond to emails seeking comments.

"Inability of certain geographies (like China and Indonesia) to access the market and the general optimism around India is helping Indian high-yield borrowers access the market," Shoaib Ahmed, director of debt capital markets at ANZ, said.

Between January and March, issuers including top lenders State Bank of India and HDFC Bank raised a total of $3 billion through dollar bonds.

High-yield issuers IRB Infrastructure Developers and Adani Green Energy saw strong response to their offerings, with bids at seven-to-eight times the issue size.

"Investors are still cautious about China's economic outlook while India growth story looks promising from a global EM perspective," Eric Liu, credit desk analyst at Nomura, said.

With improved demand, the cost of raising such funds is close to 9% for high-yield issuers, which is comparable to raising funds in the domestic market, said Nomura.

The pool of investors has also widened in recent deals to include sovereign wealth funds and real money investors who previously invested in issuers from Latin America, Central and Eastern Europe, the Middle East and Africa, Citigroup's Jalan said.

"At the core is the robust fundamentals of Indian high yield corporate, stability of economic policies with potential win for the incumbent party in the general elections and the inclusion of Indian bonds in global indices," Sanjay Guglani, CIO of Singapore-based Silverdale Capital, said.

(Reporting by Bhakti Tambe and Scott Murdoch; Editing by Mrigank Dhaniwala)

By Bhakti Tambe and Scott Murdoch