“Yields have declined after the surge in the first quarter and could increase in the second half, which would see greater supply not only from central government and state governments, but also from other state-owned enterprises,” said Venkatakrishnan Srinivasan, founder and managing partner of the debt consultancy firm Rockfort Fincap.
Indian companies and banks raised about 350 billion rupees ($ 4.39 billion) from 1 to 7 September, just under the 450 billion rupees collected in August, but still more than 335 billion lev rupees per month. from April to July, according to data collected by Reuters.
“We’ve seen big AAA-rated names exploit the bond market, and lately quasi-equities, too,” said V. Lakshmanan, head of treasury at the Federal Bank, referring to state banks and financial firms.
“If we look at the yield spreads of corporate bonds, they are priced close to those of government bonds,” he added.
State-owned Power Finance Corp raised Rs 40 billion through 10-year bonds yielding 7.42%, while the State Bank of India and HDFC Bank issued perpetual bonds to raise a total of $ 100 billion. rupees of 7.75% and 7.84% respectively.
Other AAA-rated companies such as Housing Development Finance Corp, Indian Oil Corp and Small Industries Development Bank of India (SIDBI) also raised capital this month.
While SIDBI raised funds over three years and six months at 7.23%, the marginal cost rate of SBI’s three-year loans is 8.00%.
“There is a decent appetite on the part of mutual funds, especially for good quality names,” said Pankaj Pathak, a fixed income fund manager at Quantum Mutual Fund.
Much of the demand is also due to the sudden appreciation of yields, he added, noting that so far this year there hasn’t been much pressure on repayments, which also encourages funds to invest in corporate debt.
COUPON ZRO BONDS
Meanwhile, blue-chip non-bank finance companies have also stepped up the issuance of zero-coupon bonds, which help companies better manage their cash flow.
Zero coupon bonds pay no interest during the term of the security and are issued at a discount to their face value. When the card expires, investors receive the money plus interest.
“For investors, this type of investment is beneficial even when interest rates are high, because there is no reinvestment risk during the life of the bond,” adds Rockfort’s Srinivasan.
AAA-rated non-bank financial firms such as L&T Finance and Tata Capital Financial Services and Tata Motors Finance have raised funds in this way in recent sessions.
($ 1 = 79.7400 Indian rupees)