State-run public sector units are the only entities tapping the primary debt market now. The corporates, however, have preferred to keep themselves away from issuing any new papers, expecting the bank rate to go down further. As many as Rs 19,000 crore of state-run corporate papers are in the market.
Six state-run corporates - Andhra Pradesh Power Finance Corporation (Rs 350 crore), Tapi Irrigation Development Corporation (Rs 200 crore), West Bengal Industrial Development Corporation (Rs 300 crore) and Tamil Nadu Electricity Board (Rs 100 crore), Konkan Irrigation and Development Corporation (Rs 100 crore), Vidarbha Irrigation Development Corporation (Rs 250 crore), Godavari Marathawada Irrigation Development Corporation (Rs 300 crore) - have recently entered the market to raise fresh funds. On the other hand, top corporates like Bharat Petroleum Corporation (BPCL) and Grasim have postponed their respective issues.
Merchant bankers said the dip in bank rate will not trickle down to state-run corporate papers on account of their sizable exposure and frequency of borrowing in the corporate bond market.
On the other hand, they expect that a 50 basis points reduction in bank rate will help the 'AAA' rated corporates to bring down the coupon rates by at least 25 basis points.
A corporate bond dealer with a merchant bank said: "The market has no appetite for the state government papers, which are present in large numbers, and hence a reduction in the bank rate or any other easy liquidity measures are not likely to boost the buying interest for these papers. The issuers will have to offer the same interest rate to assure the full subscription to these papers."
Another corporate bond dealer, however said, "the state run corporates which have floated their papers recently, all are engaged in infrastructure development projects and need to raise funds from the market, whatever be the interest rate scenario. Hence, though corporates can postpone their plan for raising funds, they cannot do that."
The spreads between 'AAA' companies and government securities of similar maturity have come down to 80 basis points and less from more than a percentage point in the beginning of the current financial year. In the case of financial institutions - ICICI and IDBI - as they keep on accessing the market, the spread is slightly higher.
