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Informist, Monday, Jul 22, 2024

By Siddhi Chauhan

MUMBAI – Fundraising through commercial papers rose today due to big ticket issuance by the Export and Import Bank of India. Today, companies and financial institutions raised 26.50 bln rupees through CPs against no issuances on the previous trading day.

Out of this, Export and Import Bank of India alone raised 25 bln rupees through a paper maturing in three months at a rate of 7.23%. Other than the issuance by EXIM Bank, primary market activity was muted. Bajaj Finance Securities raised 1.5 bln rupees through paper maturing in three months at a rate of 7.80%.

Fundraising through CPs has been tepid in the past few days due to lack of agreement between issuers and investors regarding the pricing of short-term papers, dealers said. While issuers have been looking to raise funds at lower rates due to an improvement in liquidity conditions and the prospect of interest rate cuts in the coming months, investors have been wary of settling for lower returns.

After repeated bouts of liquidity tightness pushing up the cost of overnight funds, investors have not been comfortable with pricing short-term debt papers at lower rates. "It would not be right to say that there is no demand from mutual funds, it is just both the parties are not able to meet an agreement," a dealer at a mid-size brokerage firm said. "Investors are not ready to enter into an agreement that offers lower rates because if the rates go up, they will be at a loss." 

On the other hand, fundraising through certificates of deposit fell slightly on caution ahead of the Union Budget for 2024-25 (Apr-Mar), which will be presented in Parliament on Tuesday, dealers said. After Tuesday, there will be some clarity on the government's plan for various schemes, its taxation plans, and the consequent impact on investor appetite.

Additionally, there was little need for funds amid surplus liquidity in the banking system. On Sunday, the liquidity surplus in the banking system was 734.45 bln rupees, as against 724.82 bln rupees on Saturday, data from the Reserve Bank of India showed.

CD issuances fell to 7 bln rupees against 10 bln rupees on Friday. Today, IDBI Bank was the sole issuer of CDs, raising 7 bln rupees through papers maturing in three months at 7.23%. On Friday, Punjab National Bank was the lone issuer of CDs, raising 10 bln rupees at 7.61% through papers maturing in one year. 

The rates on three-month CPs were flat at 7.70-7.85%, while those of similar maturity issued by manufacturing companies were at 7.17-7.37%. Rates on CDs were quoted at 7.10-7.30%.

--Primary market

* Export and Import Bank of India, Bajaj Finance Securities raised funds through CPs

* IDBI Bank raised funds through CDs

--Secondary market

* Bank of India's CD maturing on Sep 5 was dealt thrice at a weighted average yield of 7.0204%.

* National Bank for Agricultural and Rural Development's CP maturing on Sep 2 was dealt twice at a weighted average yield of 7.0296%.

At 1700 IST, the following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

End
 

Edited by Aditya Sakorkar

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