Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will raise bonds worth R1,500-2,000 crore each via private placements later this month, brokers and bankers said.
“Most companies were waiting for clarity on the debenture redemption reserve clause and also for shareholder approvals. The issuances had dried up in April and May, and whatever bond issuances were pending will now pick up,” said Shashikant Rathi, senior vice-president and head of debt capital markets, Axis Bank.
REC and PFC have already approached their shareholders through a postal ballot to raise debt, according to filings with the BSE. REC plans to raise as much as R30,000 crore in FY14-15 through non-convertible debentures.
Market watchers believe AAA-rated companies should be able to tap the bond market at 9.5% compared to 10.25-10% a year ago. Arvind Konar, head of fixed income division at Almondz Global Securities, believes that AAA-rated public sector companies may access the bond market at 9%, while similarly rated private companies may do it at 9.25-9.5%. For example, Housing Development Finance Corporation (HDFC) offered 366-day bonds at 9.13% last week via private placements.
“If the government decides to issue the new 10-year gilt later this month, we can expect a further contraction of 10-15 bps and yields may fall by another 25 bps in the next two months,” said Konar. The benchmark bond yield ended at 8.551% on Monday, up 0.446% from the previous close.
In April, debt private placements dried up to R8,230 crore, a fall of nearly 70% year-on-year, according to Prime Database.
The ministry of corporate affairs had clarified last month that it has exempted non-banking finance companies (NBFCs) from maintaining a 50% debenture redemption ratio in the last one year ahead of maturity. Unlisted corporate entities need to maintain a debenture redemption ratio of 25% a year prior to maturity.