Despite slow start, fund-raising via corp bonds to match FY14 number

Sep 04 2014, 04:31 IST
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SummaryIn the April-June quarter, corporates raised R43,147 crore, 55% lower than the R96,186 crore mobilised in the corresponding period of the previous year. Market players attributed the slowdown in issuances to the changes in the Companies Act earlier this year

Borrowings from the corporate bond market this year are likely to match FY14’s issuances despite a slow start. In FY14, companies raised debt worth R2,71,125 crore and, so far in the April-August period, they have mopped up R74,668.83 crore, according to provisional figures from Prime Database.

However, given the strong appetite from investors and the fact that coupon rates are reasonable, market watchers believe issuers will be able to mop up a fairly large sum.

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On Tuesday, Power Grid Corporation of India (PGCIL) raised R4,365 crore through strip bonds via private placement. The bonds carried a uniform coupon rate of 9.30% across three tenures of 5,10 and 15 years.

Similarly, Rural Electrification Corporation issued strip bonds and raised R3,600 crore with a coupon rate of 9.39% across 5,10, and 15 year maturities. The issue also had a coupon rate 9.30% for the three-year maturity.

In the April-June quarter, corporates raised R43,147 crore, 55% lower than the R96,186 crore mobilised in the corresponding period of the previous year. Market players attributed the slowdown in issuances to the changes in the Companies Act earlier this year.

Ajay Manglunia, senior vice-president and head of fixed income at Edelweiss Financial Services, said REC's issue saw increased participation from foreign institutional investors (FIIs).

“FIIs are looking to invest in shorter maturities. In the REC issue, domestic institutional investors (DIIs) mopped up R1,600 crore while FIIs took about 30% of the remaining R1,800 crore,” Manglunia added.

The top issuer in August was Housing Development and Finance Corporation (HDFC) with the finance company raising R2,450 crore. In July, the top issuer was Power Finance Corporation, which raised R4,335 crore.

In the July-August period, corporates issued bonds worth R31,521.83 crore, up 50.23% year-on-year.

Manglunia also expects infrastructure bonds issuances to increase through the course of the year and expects banks to raise about R50,000-60,000 crore.

ICICI Bank on Wednesday raised R3,900 crore via 10-year infra bonds against an earlier estimate of R2,000 crore. The bonds have a semi-annualised coupon rate of 9.25%. Earlier in July, the bank had raised R700 crore through seven-year bonds.

Other private sector lenders, such as Axis Bank and Yes Bank, too have announced plans for infrastructure bonds. Yes Bank said that it is looking to raise R3,000 crore, while Axis Bank is yet to disclose details.

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