India New Issue-Aavas Financiers issues rare floating-rate bonds as short-term rates set to drop

Aavas Financiers

28/10/2024 08:55

(Updates with more details throughout)
    By Dharamraj Dhutia
       MUMBAI, Oct 28 (Reuters) - India's Aavas Financiers  AVAS.NS  has raised 6.30 billion
rupees ($74.94 million) through the sale of bonds maturing in five years, with the coupon rate
linked to the six-month overnight index swap (OIS) rate, three bankers said on Monday. 
    Aavas will pay a spread of 148 basis points over the six-month overnight index swap rate,
and the coupon currently works out to be 8.07%. The coupon will be reset and paid semi-annually.
    The company did not immediately reply to a Reuters email seeking comment.
    Typically, Indian corporates raise funds via bonds with a fixed coupon but an expected drop
in short-term rates has made floating rate securities more attractive as improving banking
system liquidity is expected to pull these rates lower.
    Last week, Bajaj Housing Finance  BAJO.NS  raised 15 billion rupees through five-year bonds,
and the coupon was linked to 91-day treasury bill yield.
    In a declining interest rate scenario, companies prefer floating rate borrowings as they can
benefit from lower borrowing costs in future, Anil Gupta, senior vice president, co-group head -
financial sector ratings at ICRA, said. 
    The OIS rate - being a market determined rate - may be a preferred choice, Gupta said.
    The OIS market is seen as the best indicator of a move in policy rates and is currently
signalling an interest rate cut in February.

                
 Here is the list of deals reported so far on Oct. 28: 
             Issuer                                                         
                               Coupon (in %)  Issue size (in  Bidding date  Rating
                      Tenure                  bln rupees)*                  
                                                                            
                                                                            
             TVS      3 years  8.35           5               Oct. 28       AA (Crisil)
 Credit Services                                                            
                                                                            
             Aavas    5 years  Linked to OIS            6.30  Oct. 25       AA (Icra)
 Financiers                                                                 
                                                                            
 
*Size includes base plus greenshoe for some issues



($1 = 84.0670 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Abinaya Vijayaraghavan and Mrigank Dhaniwala)
 ((Dharamraj.dhutia@tr.com))