Large offerings from pvt cos push up Nov corporate bond supply
nformist, Monday, Dec 4, 2023
By Subhana Shaikh
MUMBAI – Fundraising through corporate bonds on a private placement basis jumped over twofold from a month ago in November on the back of big ticket offerings from large-sized private players.
Companies raised 991.68 bln rupees in November through the placement of 242 bonds compared with 405 bln rupees mobilised through 208 bonds in October, data compiled by Informist and from the National Securities Depository showed. On a year-on-year basis, fundraising through the route rose 25%.
Issuances had dropped significantly in October as several big-ticket issuers shied from the market because of a rise in borrowing costs.
"Due to the (RBI monetary) policy, market levels were not stabilised and corporates shied away from the debt market, but in November, levels stabilised and a large deal by RIL (Reliance Industries) got oversubscribed, so that provided some boost to the market," said Venkatakrishnan Srinivasan, founder of Rockfort Fincap.
Private corporates, state-owned entities and banks accounted for a major share of the total issuances in November. While public sector companies--the most frequent issuers in the corporate bond market--contributed just 23% of the total fundraising in November, private companies accounted for 34% of the total fundraising, according to data compiled by Informist. Banks formed a mere 15% of the total quantum of funds raised.
India's largest conglomerate, Reliance Industries, was the biggest borrower last month, raising a whopping 200 bln rupees through 10-year bonds at a coupon of 7.79%. The issue was fully subscribed.
The longest tenure last month was by GMR Goa International Airport. The private sector player raised 24.75 bln rupees through bonds maturing on Sep 27, 2043. Among private players, Titan Co and Larsen and Toubro raised 25 bln rupees and 35 bln rupees, respectively, through two series each.
Last month saw the offering of government-guaranteed bonds, with Mahangar Telephone Nigam raising 25.7 bln rupees by issuing bonds maturing in 10 years.
REC was the biggest issuer among state-owned entities, borrowing over 100 bln rupees through four batches of bond offerings, followed by Small Industries Development Bank of India, which raised 48.87 bln rupees through five-year bonds.
Power Finance Corp raised 26.25 bln rupees through 10-year papers, while Indian Railway Finance Corp borrowed 24 bln rupees through papers maturing in three years.
Banks, which had kept to the sidelines in October, tapped the bond market last month. State Bank of India raised 100 bln rupees through tier-II bonds maturing in 15 years and Canara Bank borrowed 50 bln rupees through 10-year infrastructure bonds.
Among housing finance companies, LIC Housing Finance tapped the bond market to raise 20 bln rupees by re-issuing its May 2033 bond. Other housing financiers such as Shriram Housing Finance, Piramal Capital and Housing Finance and Aditya Birla Housing Finance also hit the market.
The Reserve Bank of India's move to increase risk weights on personal loans by banks and non-banking financial companies by 25% to 125% and also increasing the risk weight on credit exposure of banks to NBFCs by 25% also prompted NBFCs to tap the primary market.
"Another thing was negative liquidity, which also pushed the borrowers, especially when banks were being selective in lending. So, then they were looking for alternative options. Also, there was ample appetite for long-term bonds last month," Srinivasan said.
Liquidity in the banking system was in a deficit of 487.55 bln rupees as on Nov 30, as against 1.06 trln rupees at the start of the month.
During the month, yields on corporate bonds maturing in 3-5 years issued by the benchmark National Bank for Agriculture and Rural Development rose 3-4 basis points, while those on 10 year bonds were largely steady.
According to money managers, a few mutual funds were said to have been selling corporate bonds in the secondary market as they made space for the fresh supply. End