 "Corporate bonds")
Banks and Indian companies on Thursday raised Rs 3,683 crore through corporate bonds against a planned amount of Rs 6,660 crore as investors demanded higher yields amid tight liquidity, said market participants.
Only PCBL Ltd (formerly known as Phillips Carbon Black Ltd) and its wholly-owned subsidiary Advaya Chemical Industries could raise the entire amount of Rs 1,250 crore at 8.79 per cent through bonds maturing in five years.
“Only the basic amount was subscribed because the investors were demanding higher yields,” said a dealer at a state-owned bank.
Mahindra & Mahindra Financial Services raised Rs 868 crore through bonds maturing on March 25, 2027.
SMFG India Credit Co raised Rs 560 crore through two bonds at the coupon rates of 8.29 per cent and 8.32 per cent.
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Additionally, Axis Finance rang in Rs 310 crore at 8.19 per cent through bonds maturing in five years.
L&T Finance Holdings notched up Rs 205 crore at 8.13 per cent through paper maturing on March 23, 2029.
The yield spread between corporate bonds and government bonds has widened 10-15 basis points across tenures in January. The yield on AAA-rated corporate bonds rose 12 basis points in January so far, whereas the yield on the benchmark 10-year government bond fell by 2 basis points in the same period.
State borrowing higher than expected during the quarter also weighed on corporate market sentiment, said market participants.
“Tight liquidity has dented market sentiment,” said a dealer at another state-owned bank.
The current quarter poses a significant challenge for the bond market owing to the high supply of state-government bonds. Despite the additional tax devolution to the states in December 2023, indicative borrowing by them in the fourth quarter stands notably higher at Rs 4.1 trillion. Market participants said some states might have signalled borrowing equivalent to their headroom, potentially exceeding requirements. Notably, two states have indicated a combined issuance of approximately Rs 1.2 trillion in the fourth quarter, contributing to increased borrowing.
