The state-owned refiner Hindustan Petroleum Corporation Ltd (HPCL) raised Rs 300 crore via a 90-day commercial paper (CP) at a record low coupon rate of 6.05 per cent, 45 basis points below the bank rate.
According to as merchant bankers, the paper was placed with a public bank. The issue actually is a floating rate paper with coupon at 30 basis points over the Mumbai inter-bank offer rate (Mibor).
The commercial papers have caught the fancy of the debt investors very recently as there are very few short term instrument with good return. All high-rated corporates are raising money below the bank rate.
The cheapest 90-day loan raised before today's issue was by Larsen & Toubro. It raised Rs 10 crore via a CP issue at 6.25 per cent on August 5.
The Rs 10 crore issue was rated P1+ by Credit Rating Information Services India Ltd (Crisil). According to the investment bankers, the issue was placed with a foreign bank.
This was the third instance when L&T raised money at a rate below than the bank rate. On July 29, it raised Rs 15 crore at 6.36 percent, dealers. On July 23, the same issuer issued a Rs 10 crore of CP at 6.48 per cent.
According to the bond dealers, the deals struck by L&T reflects the easy liquidity condition in the market. Said a bond dealer: "The liquidity condition remained good even after Rs 7,000 crore of auction on Friday. A bank would get a even lower return in the call money market."
The fixed income head of a merchant bank said: "The Reserve Bank of India (RBI) is pumping in money in the system by its continuous buying of dollars. We do not foresee the situation at least in the next one month. So we can see some more issues at below bank rate."
He, however, does not expect the commercial paper rates to go below the six per cent level. Meanwhile, the National Aluminium Company (Nalco) also placed Rs 100 crore of 90-day commercial paper at 6.30 per cent very recently.
Dealers are expecting the CP yields to fall further as liquidity continue to rule easy. A fixed income dealer said, "Liquidity continues to be good and the call rates are low. In a situation like this investment in CPs will give a better return and hence the banks are taking interest. Given the situation, yields of commercial papers should go down further."
