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Photo: Mint
Photo: Mint

Patanjali to hit bond markets, to issue NCDs

  • Patanjali on Thursday will start accepting bids for its debt papers that will be maturing in 3 years
  • A media report says the debt papers, rated AA- by Brickwork, carries a semi-annualized coupon of 10.1%

MUMBAI : Haridwar-based ayurvedic food and personal care products manufacturer Patanjali Ayurved Ltd.-promoted by yoga icon Baba Ramdev is looking to raise up to Rs. 250 crore via sale of non-convertible debentures (NCDs), primarily to aid its working capital needs and tackle supply chain constraints caused by the lockdown.

Patanjali is the latest to jump on the debt-raising bandwagon in the country, where due to the nationwide lockdown over the last 60 days because of covid-19 pandemic, most of the companies are concerned that due to the prolonged stagnation of commercial activities the liquidity in the bond market may not last for too long and secondly, banks too may get more cautious in subscribing to debt papers issued by Indian companies over fears that they may not be able to repay loans if incomes are affected due to the slowdown in businesses.

On Thursday, Patanjali, which has emerged as a prominent Indian FMCG firm over the past five years, will start accepting bids for its debt papers that will be maturing in three years.

On Wednesday, Bloomberg reported that the debt papers, rated AA- by Brickwork, carries a semi-annualized coupon of 10.1%.

The bond issuance, if floated, will be the first NCD issuance by Patanjali.

Also, as per the proposed bond issuance, interest payable for Patanjali bonds is higher than the 6.85% offered on AA-rated debt papers with similar maturity.

Yields on AA rated three-year corporate bonds fell on Tuesday to the lowest level since 2004, according to data compiled by Bloomberg.

Patanjali’s liquidity has been constrained due to increased investments, capital expenditure and also lower profitability, Brickwork said in a 14 March report, adding that average working capital limit utilization remains high at 97.60% for the 15-month period ended January.

To make things easier for Indian companies, RBI has been trimming interest rates in recent weeks over concerns that Asia’s third-largest economy may be headed for a contraction for the first time in four decades.

Many big companies in India look to absorb large amount of cash from the debt markets via multiple debt issuances to banks, which now have access to cheap money from the Reserve Bank of India (RBI).

On 1 May, Mint reported that Reliance Industries Ltd, Larsen and Toubro Ltd, Mahindra and Mahindra, Tata Steel Ltd, TVS Motors Ltd and NHPC are some of the large companies are in the process of at least Rs.37,000 crore to keep themselves cash-ready for the prolonged slowdown.

RIL, which had net debt of around Rs. 1.53 trillion at the end of December, plans to raise Rs.25,000 crore through issuance of NCDs, according to a report by Reuters.

Large Indian companies are in a hurry to raise money to revive industrial activities and endure the lingering impact of covid-19 lockdown. These debt issues are in addition to the equity issues that many companies have also scheduled in parallel. For example, RIL has announced plans to raise Rs.53,215 crore through a rights issue.

RIL, which had net debt of around Rs.1.53 trillion at the end of December, plans to raise Rs.25,000 crore through issuance of non-convertible debentures (NCDs) in tranches on a private placement basis, the company said in April post the lockdown.

The Tata Group, Mahindra and Mahindra and L&T too are busy accessing the bond market for funds after RBI special central bank facility allowed lenders to borrow cheaply.

On 13 April, Tata Steel said in an exchange filing it will raise up to Rs.7,000 crore through NCDs in one or more tranches. At December-end, Tata Steel's gross debt was Rs.1.09 trillion while the net debt stood at Rs.1.04 trillion.

To curb the impact of the nationwide lockdown, RBI has announced open market operations purchase of Rs.1 trillion in two tranches over the last two months.

Indian companies will be able to reduce the cost of their debts if they take advantage of the central bank’s package.

These large companies, despite established business models, are unsure about how long the current situation would continue and therefore want to conserve cash. Companies also need money for working capital requirements because while production and sales have been declining, the companies need money for the overheads and meeting fixed costs.

Engineering behemoth L&T has been looking to raise at least Rs.2,500 crore via NCDs, the company had said on 9 April.

Under the relaxed RBI norms, banks could raise money at just 4.40%. Banks are mandated to invest half of the sum from TLTRO in primary corporate bond sales.

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