Indian NBFCs double fundraising via bonds in five days as bank rate gap widens

Reuters

Indian NBFCs double fundraising via bonds in five days as bank rate gap widens

31. Mai 2023 um 3:58 vorm. GMT

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By Siddhi Nayak and Dharamraj Dhutia

MUMBAI, May 31 (Reuters) -Indian non-banking financial companies (NBFC) have raised around 100 billion rupees ($1.21 billion) via bonds in the past five days, double that of the preceding work week, with more such issues likely as interest rates in the debt market remain low, five bankers said.

Lower interest rates for such organisations typically help bring down lending rates, which in turn can push demand up.

"There is a rate arbitrage, which the NBFCs will look to utilise between MCLR-linked bank loans and short-term capital market instruments, as short-end yields are edging lower," said Nachiket Naik, head of corporate lending at Arka Fincap, a Mumbai-based NBFC.

The Refinitiv benchmark three-year yield for AAA-rated companies is around 7.45%, down 30 basis points this fiscal year, as compared to the benchmark three-year marginal cost of lending rate for State Bank of India that stands at 8.70%.

The spread between lending rates and yields further rose as the latter eased after banking system liquidity improved.

Large borrowers over the last week include State-run IRFC, which raised 25 billion rupees and NHB which raised 20 billion rupees via over three-year bonds.

Institutions coming to market soon include HDFC, which aims to raise up to 100 billion rupees via two-year bonds, LIC Housing Finance which plans to raise 15 billion rupees through five-year bonds this week and NABARD which will raise 50 billion rupees.

Here are the details of some of the bond issues completed, as well as planned, as reported by Reuters. The list is not exhaustive.

Issuer	Tenor	Coupon (in %)	Quantum (in bln rupees)	Status
HDFC	2-yr	7.8	100	Bids invited
LIC Housing	5-yr	To be decided	15	Bids invited
Shriram Housing Finance	3-yr and 6 mnts	8.8	1	Bids invited
Shriram Finance	9-yr and 5 mnts	To be decided	2	Bids invited
NABARD	3-yr and 5 mnts	To be decided	50	Bids invited
Poonawalla Housing Finance	18 mnts	8.6	2	Issue completed
Avanse Financial Services	3-yr	9.52	5	Issue completed
Avanse Financial Services	3-yr and 1 mnt	9.52	2	Issue completed
HDB Financial Services	2-yr	7.93	6	Issue completed
HDB Financial Services	2-yr and 10 mnts	7.93	4	Issue completed
Navi Finserve	18 mnts	9.25	0.75	Issue completed
Axis Finance	5-yr	7.95	5	Issue completed
L&T Finance	5-yr	7.9	1.42	Issue completed
L&T Finance	10-yr	7.85	2.5	Issue completed
Fedbank Financial Services	6-yr and 11 mnts	9	2	Issue completed
Bajaj Housing Finance	3-yr	7.78	5	Issue completed
Sundaram Home Finance	2-yr	7.84	2	Issue completed
IIFL Samasta Finance	3-yr and 6 mnts	7.85	1.5	Issue completed
IRFC	3-yr and 5 mnts	7.23	25	Issue completed
NHB	3-yr and 2 mnts	7.22	20	Issue completed

"We believe that short-term interest rates will start seeing some (more) reduction. However, banks, on the other hand, have still not fully passed on the 250-bps rate hike and we may see some uptick in rates on the bank lending side," said Sachinn Joshi, group chief financial officer at L&T Finance, that last week raised 3.92 billion rupees via bonds.

Alongside the interest rate advantage, appetite for corporate debt is also seen improving as the central bank's recent move to withdraw currency notes of 2,000 rupee denomination is expected to boost liquidity and aid shorter tenor yields.

"The increased liquidity is expected to boost savings and investments. Consequently, it is quite possible that a significant portion of the re-entered notes may end up being invested in mutual funds," said G. Pradeepkumar, CEO at Union Asset Management.

($1 = 82.7800 Indian rupees)

Reporting by Siddhi Nayak and Dharamraj Dhutia; Editing by Nivedita Bhattacharjee

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