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Informist, Thursday, May 15, 2025

By Vidhushi RajPurohit

MUMBAI – Borrowing through commercial paper rose Thursday as companies tapped the short-term debt market to roll over maturing paper, dealers said. The fall in rates and greater appetite from mutual funds, which are major investors, kept issuances up.

The total CP issued by companies rose sharply to INR 84.50 billion from INR 56.00 billion Wednesday. Reliance Retail Ventures was the biggest issuer for the day, raising INR 55.00 billion through a three-month CP at 6.53%. The company has two maturities lined up for next week which amount to INR 65.00 billion.

The next big issuer was L&T Finance, which raised INR 10.50 billion through a one-year paper at 7.04%. The non-banking finance company also has maturities lined up which total INR 15.75 billion.

"Issuances have risen because of rollover demand," a dealer at a brokerage fund said. "Earlier, many issuers were not raising funds because of high rates. Now they (rates) have fallen, so issuances have picked up."

Indicative rates on three-month CP issued by non-banking finance companies were 6.70-6.90% Thursday, after they fell 7 basis points Wednesday. Indicative rates on three-month CP issued by manufacturing companies were 6.55-6.75%.

Traders attributed the fall in borrowing rates to the lower-than-expected cut-off yields at the Treasury bill auction Wednesday. The cut-off rate for the 91-day T-bill sold Wednesday was 5.84%, 3 bps lower than estimated in an Informist poll. The cut-offs for the 182-day and the 364-day T-bills were also, respectively, 3 and 4 bps lower than the poll estimates. This happened as the April headline CPI inflation data, which came in at a 69-month low, strengthened hopes of a cut in the Reserve Bank of India's repo rate in June, dealers said. Consequently, rates on three-month paper issued by banks fell 5 bps to 6.45% Thursday.

Despite the fall in rates, only two banks tapped the short-term debt market to raise INR 50.00 billion, down from INR 75.00 billion Wednesday. The fall in CD issuance was likely on account of improved liquidity in the banking system and expectations of a large surplus transfer by the RBI to the Centre. Market participants' estimate of the RBI's surplus transfer for the financial year 2024-25 (Apr-Mar) range from INR 2.50 trillion to INR 3.50 trillion, higher than INR 2.11 trillion for FY24.

"There is good liquidity now in the system so not many banks are coming to the CD market," a dealer at a state-owned bank said. "Yesterday (Wednesday), many banks came to the market who had requirements, so today (Thursday) it has eased." Wednesday, the RBI net absorbed INR 1.84 trillion from the banking system, higher than INR 1.54 trillion Tuesday.

HDFC Bank and Bank of Baroda were the only two issuers of CDs Thursday, issuing three-month paper to raise INR 35.00 billion and INR 15.00 billion, respectively. HDFC Bank raised the funds at 6.47% and Bank of Baroda at 6.45%.

--Primary market

* Reliance Retail Ventures, Godrej Industries, Axis Securities, Kotak Securities, Bajaj Finance Securities, Motilal Oswal Financial Services, L&T Finance, and ICICI Securities raised funds through CPs.

* HDFC Bank and Bank of Baroda raised funds through CDs.

--Secondary market

* Canara Bank's CD maturing Friday was traded five times at a weighted average yield of 5.8044%.

* Bajaj Finance's CP maturing Friday was traded nine times at a weighted average yield of 5.8509%.

Following were the volumes, in INR billion, in the secondary market for short-term debt at 1700 IST, as detailed by the Clearing Corp. of India's F-TRAC platform:

End

Edited by Rajeev Pai

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