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Informist, Monday, Nov. 4, 2024

By Vidhushi RajPurohit 

MUMBAI – Issuances in the short-term debt market picked up Monday as companies and banks tapped the market to refinance their maturing papers for November, dealers said. Issuances were on the higher side compared to the muted activity on Thursday owing to the festival of Diwali. Despite the increase in issuances, the rates on short-term debt paper remained largely unchanged. "Demand from mutual funds was high, as is the case towards month-start as mutual funds are free from redemption pressures," a fund manager with a mutual fund said. "So the issuances were easily subscribed without any spike in rates."

The rates on three-month certificates of deposit were at the same level as on Thursday--7.15-7.20%. The rates on three-month paper issued by non-banking finance companies were quoted at 7.45-7.50% Monday, unchanged from the previous day. The rates on paper of similar maturity issued by manufacturing companies were also unchanged at 7.20-7.25%.

The total amount raised through CDs was INR 49 billion, against nil Thursday. Bank of Baroda was the largest issuer and raised a cumulative sum of INR 27 billion from two CDs of different maturities. It issued a three-month paper and raised INR 9 billion at 7.16% and raised the remaining INR 18 billion from a paper maturing in May 2025 at 7.40%. For November, Bank of Baroda has the second-largest maturing amount of INR 98.50 billion. The largest maturing amount is for Punjab National Bank, at INR 146 billion. It also tapped the market and raised INR 12 billion by issuing a three-month paper at 7.17%. 

The remaining INR 10 billion was raised by Indian Bank from a three-month paper at 7.18%. It also has an upcoming maturity of INR 35 billion. Dealers expect a gradual increase in CD issuances for this month as more banks will tap the market to refinance their maturing papers. "The activity in the CD market is mostly based on banks' rollover demand, so when the maturity dates approach, more banks will be active in the issuing side," a dealer with a state-owned bank said. The total amount due for redemption in November for CDs is INR 629.45 billion.  

On Monday, the total commercial papers issued amounted to INR 13.5 billion, against nil Thursday. All the entities that tapped the CP market also have redemption amounts due in November. Godrej Consumer Products was the largest CP issuer and tapped the market to raise INR 8.5 billion from a three-month paper at 7.20%. The remaining INR 5 billion was raised cumulatively by Bajaj Financial Securities and Kotak Securities, as both issued a three-month paper. Bajaj Financial Securities raised INR 2 billion at 7.60% and Kotak Securities raised INR 3 billion at 7.57%. 

"The issuance of CPs for this month will most likely be on the higher side as there is a large maturity amount due," a dealer with a mutual fund said. "It is usual for the issuances to pick up in Nov-Dec as it is the year-end period and there is a greater demand for funds." The total CPs due for redemption this month stands at INR 1.12 trillion.

--Primary market

* Punjab National Bank, Bank of Baroda and Indian Bank raised funds through CDs.

* Godrej Consumer Products, Kotak Securities and Bajaj Financial Securities raised funds through CPs.

--Secondary market

* Bank of Baroda's CD maturing Feb. 07 was dealt two times at a weighted average yield of 7.1871%.
* Godrej Consumer Products' CP maturing Nov. 07 was dealt two times at a weighted average yield of 7.1460%.

At 1700 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 Tanima Banerjee

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