Power Finance Corporation (PFC) raised ₹5,941 crore through two bond issuances on Friday, against a combined offer size of ₹6,000 crore, including green-shoe options. The company accepted ₹2,968 crore for its 18-month bonds at a coupon of 8.21 per cent and ₹2,973 crore for its five-year bonds at 8.05 per cent.
Housing and Urban Development Corporation (HUDCO) raised ₹2,500 crore through a 10-year bond issuance, fully subscribing to its offer comprising a base issue size of ₹500 crore and a green shoe option of ₹2,000 crore. The company accepted bids at a coupon of 7.92 per cent.
Tata Capital Housing Finance accepted ₹603 crore through its bond issuance at a coupon of 8.40 per cent, against a total issue size of ₹1,900 crore. The bonds are scheduled to mature on November 14, 2031. Mahindra & Mahindra Financial Services, meanwhile, accepted ₹651 crore through its bond issuance at a coupon of 8.45 per cent, against a total issue size of ₹2,000 crore. The bonds mature on September 26, 2029.
Other recent transactions included National Bank for Agriculture and Rural Development (Nabard) raising ₹6,000 crore through five-year bonds at a coupon of 8.27 per cent, while Small Industries Development Bank of India (SIDBI) raised ₹5,607 crore at 8.17 per cent.
“PSUs, banks and financial institutions, NBFCs, HFCs, private corporates and municipalities have returned to the market across rating categories. For many AAA-rated issuers, domestic bond funding has become comparatively attractive against bank EBLR-linked loans, particularly in the 18-month to five-year segment,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP. He said the recent transactions demonstrated the depth of investor demand, with long-term institutional investors looking to deploy funds and complete their investment allocations.
“Even when market yields are above 8 per cent across several corporate bond maturities, selected issuers are able to secure finer pricing as long-term institutional investors seek to deploy funds and complete their investment allocations,” he said. The corporate bond market was showing resilience despite volatility in government bond yields, with issuers using favourable market windows to raise funds and investors remaining selective about credit quality, maturity and pricing, he added.
However, the direction of borrowing costs will remain sensitive to crude oil prices, the rupee, US Treasury yields, domestic inflation, banking system liquidity and expectations of Reserve Bank of India (RBI) policy action. The December monetary policy review will be particularly important in determining the trajectory of borrowing costs, Srinivasan said.
On Friday, the yield on the benchmark 10-year government security rose six basis points during the day to 7.31 per cent, while the five-year government security yield increased three basis points to 6.98 per cent.
The initial rally in government securities following the US midterm election results had created an attractive window for issuers to lock in lower borrowing costs. The 10-year G-Sec yield had declined to around 7.06 per cent before reversing course. The initial optimism was driven by expectations of an early resolution to the Iran conflict. However, with an amicable settlement remaining elusive, crude oil prices and US Treasury yields have turned volatile again. The US 10-year Treasury yield has risen from around 4.82 per cent to above 5.12 per cent, while the Indian 10-year G-Sec yield has climbed back above 7.30 per cent.
Adding to the concerns, October retail inflation came in at 6.09 per cent, breaching the RBI’s upper tolerance limit of 6 per cent and fuelling expectations of another 25-basis-point rate hike in December.
- Corporate bond issuances have touched around ₹50,000 crore in November so far
- Power Finance Corporation raised ₹5,941 crore through 18-month and five-year bonds
- HUDCO raised ₹2,500 crore through a 10-year bond issuance at a coupon of 7.92%
- Tata Capital Housing Finance accepted ₹603 crore against an issue size of ₹1,900 crore
- M&M Financial Services accepted ₹651 crore against an issue size of ₹2,000 crore