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Informist, Thursday, Nov. 7, 2024

 

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--Sources: Big ticket PSUs set to tap bond mkt, two issuances seen next wk 
--Sources: PFC likely to raise up to INR 60 bln via 2 bonds next week 
--Sources: NHB may raise up to INR 50 bln via 5-year bond next week 
--Sources: IOC likely to tap bond market with 5-year bond by Dec end 

 

By Sachi Pandey

 

MUMBAI – After a slowdown in fundraising by public sector entities, big-ticket state-owned companies are once again heading back to the bond market starting as early as next week, sources aware of the development said. Power Finance Corp and National Housing Bank are in discussions with arrangers to raise funds through bonds next week, three sources told Informist. Indian Oil Corp. is also expected to raise funds through corporate bonds before the end of December, they added.

 

"PFC is planning two tenures--one short-term and one long-term--like they usually do. NHB and IOCL are also in the pipeline," a source closely involved with the discussions said on the condition of anonymity. 

 

Power Finance Corp aims to raise between INR 50 billion-60 billion through two bonds, the sources said. The company will likely announce the bidding details next week with a shorter-term bond of three to five years maturity and a longer-term bond maturing in 12 or 15 years.

 

The company is yet to get board approval for the issuances. "PFC has a board meeting scheduled on Friday, after which they will likely announce the bidding," said another source at a large insurance company.

 

So far this financial year, Power Finance Corp has raised INR 156.96 billion through five bonds with maturities ranging from seven to 15 years, carrying coupons between 7.22-7.44%.

 

National Housing Bank is also expected to announce the bidding details for its bond issuance next week. NHB plans to raise up to INR 30 billion-50 billion, including a greenshoe option, the sources said. The development finance institution will likely issue five-year bonds to raise the funds.

 

So far this fiscal year, NHB has raised INR 92 billion through bonds maturing in 2027 at coupon rates of 7.59-7.79%. It has also raised another INR 30 billion through April 2031 bonds at a coupon of 7.51%.

 

Apart from PFC and NHB, Indian Oil Corp., the country's largest crude oil refiner and fuel retailer, is also considering raising funds. "IOCL is planning mostly 5000 cr (INR 50 billion). However, nothing is decided yet, but they will come to raise in the 5-year band. They are in between discussions to raise funds," the first source said.

 

In July, IOCL raised INR 25 billion through five-year bonds at a rate of 7.36%. "They have to raise funds in two tranches, one is done, so they will come with another tranche in this quarter itself," the source added.

 

These issuances come as public sector entities navigate challenges in raising funds amid regulatory changes. "The new SEBI (Securities and Exchange Board of India) guidelines on getting board approval or informing about issuance had slowed PSU fundraising," a dealer at a large-sized private sector bank said. 

 

On Sept. 18, SEBI issued amendments to corporate debt issuance regulations. The regulations were interpreted initially as requiring board approval for every individual bond issue, whether through private placement or public offer. This added complexity to the fundraising process. However, SEBI issued a clarification on Oct. 10 stating that the amendments did not mandate prior board approval for each term-sheet, but only required a review by the board. 

The misunderstanding caused many companies to halt fundraising. "Some PSUs find it manageable because they have easier access to their board members, but others may face delays. It's not just about notifying the board, they also need to discuss expected pricing ranges, which creates certain problems," the dealer with the private sector bank said.

 

Fundraising by public sector banks dropped 26% on month in October to INR 229.2 billion from INR 308 billion in September. However, market participants now expect public sector fundraising to pick up.

 

On Thursday, shares of Power Finance Corp. ended 1.2% lower at INR 462 on the National stock exchange, while shares of Indian Oil Corp. ended 0.3% lower at INR 144.15.  End

 

Edited by Saji George Titus

 

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