Indian short-end corporate bond issuances surge as yields fall

Sundaram Finance

16/11/2022 09:06

By Dharamraj Dhutia and Bhakti Tambe
       MUMBAI, Nov 16 (Reuters) - Indian companies, especially
shadow lenders, may continue to flock to the corporate bond
market in the near term to raise funds following a decline in
yields, analysts said on Tuesday. 
    "Yields have corrected sharply as views regarding interest
rates have changed, and before the next policy meeting, issuers
are rushing to lock funding at lower costs," said Ajay
Manglunia, managing director and head of Investment Grade Group
at JM Financial.
    Non-banking financial companies (NBFCs) Housing Development
Finance Corp  HDFC.NS , Sundaram Finance  SNFN.NS , Aditya Birla
Finance, HDB Financial Services aim to raise over 125 billion
Indian rupees ($1.54 billion) by issuing two-year to five-year
bonds this week. 
    The line up of issuances comes on the back of Bajaj Finance
 BJFN.NS  raising 51 billion rupees through three-year notes on
Tuesday, and SIDBI raising funds last week via
more-than-three-year bonds at a 7.47% coupon, 28 basis points
lower than what it had paid for a similar issue in mid-October.
    "Since a lot of issuers were postponing issuances in a
volatile, rising interest rate scenario, they see this fall (in
yields) as the right time to capture unmet bond demand and are
coming back to the market," said Nagesh Chauhan, head of debt
capital market at Tipsons Group.
    Indian corporate bond yields have eased around 10-15 bps in
the last week, in line with the fall in government yields, as
softer inflation data in India and the United States have raised
bets of a policy pivot by central banks. 
    The Reserve Bank of India has raised its key lending rate by
190 basis points to 5.90% since May, with the next decision due
in December. 
    Market participants expect the issuance pattern to remain in
favour of shorter tenors. 
    "The trend will remain biased towards short-term borrowings,
majorly two-year to three-year bucket, as longer-tenure bond
demand is still uncertain and only for selected state-run
companies," Tipsons Group's Chauhan said. 
    Mutual funds, one of the largest holders of corporate bonds,
are receiving inflows towards short-term debt schemes where they
are looking to park their corpus, spurring more such issuances. 
    "There was not much supply in corporate bonds, and mutual
funds have to invest, so they are chasing whatever limited
spreads they are getting in these NBFC bonds," said Raju Sharma,
head fixed income at IDBI Mutual Fund. 
($1 = 81.3200 Indian rupees)
 (Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by
Dhanya Ann Thoppil)
 ((Dharamraj.dhutia@tr.com))