Mumbai: A clutch of Indian banks and state-run firms are planning to raise funds on expectations cash surpluses in the banking system may rise in the near term.
Cash conditions in the banking system have tightened in recent weeks due to quarterly tax payments and bond auctions, but the situation is expected to ease in the near term due to increased federal spending and inflows.
This has encouraged local firms, which had put their fund raising plans on the back burner, to start tapping the markets.
“January is also the month when pension funds are flush with cash and are looking to park their funds and companies are looking to exploit this,” a merchant banker said.
State-run Bank of Baroda is in advanced talks with bankers to raise up to Rs10 billion (Rs1,000 crore, $253 million) via bonds, while Andhra Bank may raise as much as Rs7-8 billion in debt, merchant bankers said.
Both these issues are expected to be priced around the 9.35-9.4% levels, bankers said.
UCO Bank has opened a upper-tier 2 bond issue for Rs3.20 billion plus a greenshoe option for an unspecified amount.
The issue, which carries a coupon of 9.35% payable annually and will increase by 50 basis points after 10 years, closes on Thursday.
State-run power lender Power Finance Corp Ltd has called for bids for 3-year, 5-year and 10-year bonds for Rs2 billion, plus a greenshoe option for an unspecified amount. The issue closes on Thursday.
“A lot of more issuers are waiting on the sidelines and once cash conditions ease more, we may see many more Rs10 billion plus issues hitting the market,” another banker said.
The yield on Reuters’ benchmark five-year corporate paper was at 9.31% on Monday, up 9 basis points from a week ago. The spread between the 5-year corporate and government debt was at 131 basis points, up from 125 a week back.