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Informist, Tuesday, Oct. 22, 2024

By Vidhushi RajPurohit 

MUMBAI – Issuances in the short-term debt market picked up, with a rise in issuances of commercial papers by companies, while banks continued to remain on the sidelines. The rates on CPs remained unchanged due to firm demand from mutual funds, dealers said. 

The rates on three-month papers issued by non-banking financial companies were quoted at 7.45-7.50% on Monday, unchanged from the previous day. The rates on papers of similar maturity issued by manufacturing companies were also unchanged at 7.20-7.25%.

The issuance of commercial papers was higher than that issued on Monday. Tuesday, the CPs issued totalled INR 22.75 billion, against INR 19.5 billion raised on the previous day. Bajaj Finance Securities issued a three-month paper and raised INR 9 billion at 7.70%. Of the total, INR 2 billion was raised by SBI Capital Securities from a three-month paper at 7.76%. Birla Group Holdings also issued a three-month paper to raise INR 3.75 billion at 7.82%. 

UltraTech Cement and Godrej Industries also issued three-month papers and raised INR 5 billion and INR 1.5 billion, respectively. UltraTech Cement raised the amount at 7.28%, and for Godrej Industries, the rate was at 7.37%. GIC Housing Finance raised the remaining INR 1.5 billion at 7.48% from a three-month CP.

No certificates of deposit were issued during the day. Monday, Bank of Baroda was the sole issuer of CD, and it raised INR 3 billion at 7.40% from a paper maturing in May. The rates on three-month CDs were at the same level as on Monday--7.15%-7.20%. 

Some dealers also attributed the low CD issuances to the high surplus liquidity in the banking system. The surplus liquidity in the banking system was at INR 794.88 billion, against INR 1.52 trillion on Sunday. "Liquidity has been in surplus for the entire month, it has narrowed now on GST (outflows) but it is a short-term thing, so banks won't make the decision to issue CDs on this basis," a dealer with another state-owned banks said. "Once the month-end spending comes, the surplus will get a boost." 

Market participants do not expect a major spike in issuances for the rest of October. "Issuers will likely be active again in Nov-Dec, because of funding needs for both festive requirements and also for the quarter-end needs," a dealer with a brokerage firm said. For October, the issuances have been infrequent and largely based on the refinancing needs of the issuers. The redemption amount for October is on the lower side, hence the issuances have mostly matched the pace with that, dealers said. "Fresh issuances are not that much for this month (October), but in terms of refinancing issuers are tapping the market when the need arises," a dealer with a private bank said. 

So far, in October, non-banking financial institutions and manufacturing companies have already raised commercial papers totalling INR 691.30 billion, against the maturing amount of INR 635.18 billion. For certificates of deposit, the amount stands at INR 492.70 billion, lower than the redemption amount of INR 649.80 billion. "Banks have been less active because they issued heavily in September to meet the quarter-end needs," a dealer with a state-owned bank said.

--Primary market

* Bajaj Financial Securities, SBI Capital Securities, GIC Housing Finance, Birla Group Holdings, UltraTech Cement and Godrej Industries raised funds through CPs.

--Secondary market

* Punjab National Bank's CD maturing Nov. 21 was dealt one time at a weighted average yield of 7.0006%.
* Tata Communications's CP maturing Oct. 23 was dealt one time at a weighted average yield of 6.7172%.

At 1630 IST, the following were the volumes, in INR billion, in the secondary market for short-term debt, as detailed by the Clearing Corp of India's F-TRAC platform:

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Manisha Baxla

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