Indian state-run firms set to issue long term bonds to meet investor demand

NHPC

22/08/2024 10:40

By Dharamraj Dhutia
       MUMBAI, Aug 22 (Reuters) - Indian state-run companies
are poised to raise about 50 billion rupees ($595.61 million)
through long-term securities over the next two weeks, as falling
government bond yields and reduced state debt supply leave
investors starved for opportunities.
    At least four state-run firms—THDC India  THDC.BO , NHPC
 NHPC.NS , India Infrastructure Finance  IIFCL.UL , and Indian
Renewable Energy Development Agency  INAR.NS  — which have not
been frequent issuers, are set to tap the market with bond
offerings ranging from 10 to 15 years, according to three
merchant bankers.
    None of the companies replied to Reuters emails seeking
comments. The merchant bankers did not want to be named because
they are not authorized to talk to media.
    "Since government bond yields have eased and even long-tenor
yields are below 7%, insurance companies that have been seeing
regular inflows are keen to add longer duration highly rated
papers in their portfolios," said Aneesh Srivastava, executive
director and chief investment officer at Star Health Insurance.
    India's 10-year bond yields have stayed around 6.85%, while
15-year bond yield is at 6.90%. The 30-year and 40-year bond
yields are around 6.97%-7.00%. 
    Companies have funding needs, and rather than waiting for
the second half, they are capitalizing on strong investor
appetite and improving liquidity conditions, said one of the
bankers involved in the deals.
    Government bond yields have eased on bets that interest rate
cycle is set to turn initially in U.S. followed by India. 
    The Federal Reserve is expected to cut rates in September,
while many traders eye rate cut from Reserve Bank of India in
December. 
    "In a falling interest rate regime, investors will have to
look out for window of opportunities to earn additional returns
wherever possible," Star Health's Srivastava added. 
    Currently, the corporate bond yield curve is slightly
inverted, with long duration bond yields marginally lower than
short-end. 
    Sandeep Yadav, head of fixed income at DSP Mutual Fund,
expects the corporate bond yield curve to remain flat, adding
that even if the yield curve steepens, longer maturities will
offer greater profit for the same yield movement compared to
shorter maturities due to their higher duration.

($1 = 83.9475 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Nivedita
Bhattacharjee)
 ((Dharamraj.Dhutia@thomsonreuters.com;))