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How top borrowers are bringing life to market

MUMBAI: Reliance Industries, HDFC, and LIC Housing Finance h..

MUMBAI: Reliance Industries, HDFC, and LIC Housing Finance have together raised about Rs 7,000 crore in domestic debt sales over the past few days, signalling a tentative revival in the bond market that was recently rattled by rising yields.

Three people with direct knowledge of the market transactions told ET that the sales came after the recent liquidity squeeze that choked the flow of funds to non-banking finance companies (NBFCs).

LIC Housing Finance confirmed the bond sale. E-mails sent to Reliance and HDFC remained unanswered.

“Issuers were waiting on the side lines amid a liquidity squeeze and rising rates,” said Ajay Manglunia, executive vice president, Edelweiss Financial Services. “Now they are gradually coming back. This will get the primary bond market moving, which has been relatively less active. Things are beginning to ease.”

Reliance raised Rs 3,500 crore with 10-year maturity instruments. HDFC mopped up about Rs 3,000 crore with similar maturity bonds. The rates offered were 9.05%. LIC Housing Finance sold Rs 450 crore of bonds, with subscription reaching three times the base size. The five-year papers are carrying a coupon rate of 9.05%.

“The primary market is mobilising again,” said Mahendra Kumar Jajoo, head of fixed income investments at Mirae Asset Global Investments. “Investors are coming back to the debt market with long term investors taking the lead. Markets are showing signs of life amid a stabilising rupee.”

The Employees Provident Fund Organisation (EPFO), the largest domestic debt investor, is said to have invested in those bonds, market sources said. Some insurance companies also bought the issues. It did not reply to ET's email query.

Rural Electrification Corporation is in talks to raise Rs 500 crore, while Hudco has reached out to potential investors for its bond sale, dealers said.

“Mutual funds have not yet started buying papers as primary bond sales are of long-term maturities. It will soon begin as more sales are on the anvil,” said the chief investment officer from a large fund house.

Primary bond sales slowed down significantly after infrastructure conglomerate IL&FS defaulted on repayments. Moreover, the benchmark bond yield was rising after an increase in US Treasury yields that touched 3.2%.

But the benchmark bond yield fell about 24 basis points pushing prices up in the past two weeks after the central bank kept the policy rate unchanged.

Original Article


ET Markets


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