Indian state-run firms plan 340 bln rupees bond raid as yields drop-bankers

Housing and Urban Development

13/01/2023 07:24

By Dharamraj Dhutia
       MUMBAI, Jan 13 (Reuters) - Indian state-run companies
plan to raise as much as 340 billion rupees ($4.19 billion) via
the debt market over the next two weeks to capitalise on easing
bond yields and avoid the fiscal year-end liquidity crunch,
merchant bankers said.
    Indian bond yields have eased this month, with the benchmark
10-year yield dipping 10 basis points (bps) this week alone, as
cooling domestic and U.S. inflation has raised the likelihood of
an imminent end to the interest rate-hike cycle.
    "Since yields have eased slightly, companies are going
aggressive in their fundraising exercise, and also they would
not want to keep a larger chunk towards the end of the fiscal as
liquidity is likely to tighten," said Ajay Manglunia, managing
director and head of investment grade group at JM Financial.
    Earlier this week, state-run REC raised more than 50 billion
rupees through a combination of over three-year and over 10-year
bonds, an offering that Indian Railway Finance Corp  INID.NS  is
set to replicate.
    Financial institutions NABARD and SIDBI will aim to raise an
aggregate of 110 billion rupees through shorter tenor bonds,
while Housing and Urban Development Corp  HUDC.NS  is also in
talks with bankers and investors to line up issuances.
    State Bank of India  SBI.NS , the country's largest lender,
got board approval earlier this week to raise 100 billion rupees
through 15-year infrastructure bonds.
    "Large bond issuances are expected to continue from
state-run companies as credit growth accelerates," said
Venkatakrishnan Srinivasan, founder and managing partner of debt
advisory firm Rockfort Fincap.
    "As banks are expected to increase their lending rates
further, all these companies are preferring the bond market
where funds are still available at attractive and compressed
levels." 
    Sanjay Pawar, a fixed income fund manager at LIC Mutual
Fund, said companies are also aiming to lock rates before the
Union budget, due on Feb. 1, as the market expects the
government to borrow more than it did last year.
    DEMAND OUTLOOK
    While longer-duration bonds will be absorbed by pension
funds and insurance companies, mutual funds may chase
shorter-term issuances, albeit at a higher yield, merchant
bankers said.
    "Going ahead, liquidity will tighten, so sailing through of
large issues may push the spreads," said VRC Reddy, treasury
head of Karur Vysya Bank.
    The spread between the corporate bond yield and the
five-year government bond yield is around 40 bps, and around 25
bps on an annualised basis for the 10-year yield.
    "Bond supply from both banks as well as companies is picking
up," said Archita Joshi, fixed income adviser at Motilal Oswal
Financial Services.
    "The three-year to five-year maturity corporate bonds will
offer better risk-reward."
 Company name  Tenor                 Quantum in      Bidding
                                     billion rupees  status
 REC           3-year and 6 months   30              Done
 REC           10-year and 19 days   20.04           Done
 NABARD        5-year and 15 days    60              Friday
 SIDBI         3-year and 23 days    50              Monday
 IRFC          3-year and 3 months   25              Monday
 IRFC          10-year and 3 months  25              Monday
 HUDCO         3-year to 5-year      30              Likely next
                                                     week
 SBI           15-year infra bonds   100             Likely next
                                                     week
 ($1 = 81.1100 Indian rupees)
 (Reporting by Dharamraj Dhutia
Editing by Swati Bhat and Savio D'Souza)
 ((Dharamraj.dhutia@tr.com))