Yields of government bonds coming off after the monetary policy announcement by the Reserve Bank of India (RBI) has led to a spurt in the country's fixed-income markets, as finance companies plan to hasten fund-raising plans. Several finance companies would issue non-convertible debentures (NCDs) this month by giving attractive coupon rates.
"The fall in the yield on government bonds, to which pricing for debentures is linked, has given a window for finance companies to raise funds at lower costs, "said Navin Bangera, senior vice-president, Centrum Capital. Muthoot Finance plans to raise around Rs 600 crore though the issuance of NCDs, with an option of allocating additional shares worth Rs 300 crore. The company in the country would offer coupons between 13-13.43 per cent per year across different maturity periods extending up to five and a half years.
While the yield on 10-year government bonds is hovering around 8.4 per cent, firms are looking to attract investors in a falling interest rate environment. "The amount we are raising is a very small fraction of our total book, which amounts to a little more than Rs 20, 000 crore. The liability is minimal. However, the yields are attractive to our investors, as the interest rates are on a downward trajectory," said Oommen K Mammen, chief financial officer, Muthoot Finance.
There are several others in the pipeline. L&T Finance plans to raise Rs 1,500 crore and Shriram Transport Rs 500 crore through NCD issuances. Others like Tata Capital are also looking to tap the opportunity to raise funds to meet business needs. Sundaram BNP Paribas Home Finance would raise Rs 300 crore through NCDs as well. "Borrowing from banks is the costliest in a high interest rate regime and NCDs are a better option. Right now, interest rates have peaked, and investors are looking for attractive investment options," said Mammen.
