NBFC, banks to sell bonds worth more than ₹30,000 crore this week
HDFC will issue 10-year NCDs worth ₹10,000 crore and HDFC Bank will float AT1 bonds worth ₹3,000 crore
PremiumBonds worth over ₹30,000 crore issued by banks and non- banking financial companies (NBFCs) are set to hit the market later this week, as they seek to raise funds at lower interest rates ahead of a possible rate hike this month, according to two investment bankers.
A majority of the bonds will be issued by NBFCs and will have tenures of five years and above, they said.
HDFC will issue 10-year non convertible debentures (NCD) worth ₹10,000 crore, HDFC Bank will float additional tier 1 bonds worth ₹3,000 crore and Small Industries Development Bank of India is expected to issue 42-month bonds worth ₹4,000 crore.
“People feel the rate cycle is stable. Tenure has come down. There is stability in the market," said a treasury head of a public sector bank, seeking anonymity. “That said, we are yet to see any major issuance by manufacturing companies as private investment hasn’t picked up. Also, loan rates are cheaper than corporate bond yields," he said.
Among banks, State Bank of India, HDFC Bank, and Bank of Maharashtra are set to hit the market with AT1 bonds of more than ₹10,000 crore this week.
Bank of Baroda, Punjab National Bank, and Canara Bank have already tapped the AT1 bond market.
Public sector banks are likely to raise ₹20100 crore via AT1 bonds in the current financial year (FY23) to meet growth requirements, according to Rating agency ICRA Ltd.
Yields on AT1 bonds are down to 7.8-7.95% from levels of 8-8.75%.
“As the rate trajectory is stable and the story of India getting included in the global indices is making rounds with better chances this time, everyone is bullish. A stable rate trajectory and lower crude is helping a lot. We will learn from the policy meet at the month-end. Due to the lower inflation, a rate hike or hawkish stand may taper off a bit. Investors and traders do not want to miss the bus," said Ajay Manglunia, managing director of JM Financial Ltd.
According to Primedatabase, corporate bonds worth ₹1.45 trillion were raised since June. This is 15% higher than the year ago.
That said, credit growth to industry accelerated to as much as 10.5% in July from 0.4% in July 2021. Credit to large industry grew 5.2% against a contraction of 3.8% in the year ago period.
Overall credit growth was at 15.1% year-on-year in July, compared to 13.7% in June.
The services and industry sectors led to the credit growth in July, followed by agriculture and retail.
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