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Informist, Monday, Nov. 11, 2024

By Vidhushi RajPurohit

MUMBAI – Only two issuances of short-term debt papers were reported on Monday due to low requirement of funds after recent borrowings, dealers said. Both the issuances were made by companies as banks were flush with ample liquidity and did not face the need to borrow. "During the initial days, both banks and companies actively raised funds to refinance the papers maturing near the beginning of November, but now it has quieted down as the maturing amount is also not that high," a fund manager with a mutual fund said. 

Rates on short-term debt instruments remained flat on account of subdued activities in the market, dealers said. The rates on commercial papers issued by manufacturing companies were at Friday's level of 7.20-7.25%. Papers of similar maturity issued by non-banking financial companies were quoted at 7.45-7.50%, unchanged from Friday's close. Rates on the certificates of deposit for three-month tenure were also unchanged at 7.15-7.20%. 

Two companies that tapped the commercial paper market raised INR 5.5 billion, up from Thursday's INR 500 million. UltraTech Cement was the largest issuer, raising INR 5 billion through a three-month paper at 7.18%. In November, the company had a redemption matching the issuance amount of INR 5 billion. The remaining INR 500 million was raised by Aditya Birla Finance by issuing a one-year paper at 7.79%. The non-banking financial company has a total maturity amount of INR 30.40 billion in November. So far, it has issued CP totalling INR 7.5 billion. 

"CDs issuances are based on banks' need for funds and for now most banks are well-equipped with funds; hence, the muted issuances," a dealer with a state-owned bank said. So far, surplus liquidity in the banking system has consistently remained above INR 2 trillion in November. Sunday, the systemic surplus liquidity was at INR 2.26 trillion.

The issuance of CDs for refinancing needs may also be slightly lower this month, dealers said. CDs worth INR 629.45 billion are maturing in November, about INR 20 billion less than October. Dealers said that slowdown in credit growth has also moderated CD issuances. According to data released by the RBI, the on-year growth in banks' outstanding deposits as of Oct. 18 outpaced the loan book growth for the first time since April 2022. Indian banks' loan book grew 11.5% on year to INR 172.38 trillion as of Oct. 18, while deposits rose 11.7% to INR 218.08 trillion.

However, market participants expect the issuances to pick up gradually in the rest of the month. "The issuances will pick up as more issuers will tap the market as and when the redemption requirement arises," a fund manager with a mutual fund said. 

--Primary market

* No bank raised funds through CD.

* UltraTech Cement and Aditya Birla Finance raised funds through CP.

--Secondary market

* Bank of Baroda's CD maturing on Dec. 6 was dealt three times at a weighted average yield of 6.8339%.
* Reliance Retail Ventures' CP maturing on Nov. 12 was dealt seven times at a weighted average yield of 6.4616%.

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 Akul Nishant Akhoury

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