Corporates raise ₹2 trillion through bond market in Q1FY21

Earnings for the quarter ended 31 March have painted a bleak image of India Inc’s financials, with web gross sales and revenue, adjusted for one-time revenue or loss, slumping to a 20-quarter low, Mint reported on Thursday.

With the nationwide lockdown lasting throughout a lot of the June quarter, most firms avoided offering earnings steering resulting from continued market uncertainties and have been specializing in aggressive cost-cutting measures and delaying capex to create liquidity buffers for later a part of the fiscal.

India Inc’s rush to raise liquidity pushed the bond market fundraising quantity for the June quarter considerably greater than final 12 months. Typically the primary quarter of the fiscal is a lean interval. Last 12 months corporates raised solely ₹1.three lakh crore in the June quarter.

The bond issuance exercise was at its peak throughout the first two months which noticed corporates raise ₹1.47 trillion through these bonds. Many AAA rated firms rushed to faucet the market particularly in April to benefit from straightforward funds made obtainable below the Reserve Bank of India’s Targeted Long Term Repo Operations (TLTRO). The issuances for the month of June stood at ₹51,091 crore.

The quarter noticed huge ticket issuances by corporates similar to Reliance Industries which raised ₹24,955 crore, Tata Group which raised ₹5700 crore and and L&T group which raised ₹11,851 crores. Corporates like Mahindra & Mahindra, Crompton Greaves Consumer Electricals and L&T group additionally raised funds through the company bond market this 12 months.

While a number of corporates raised funds in the bond markets, the exercise was largely dominated by excessive rated non-banking finance firms which tapped the home market to avail of the RBI’s TLTRO.

Among the NBFCs, Rural Electrification Corporation Ltd (REC) raised ₹12853.5 crore, Housing Development finance company (HDFC) raised ₹15250 crore and Power Finance Corporation (PFC) raised practically ₹23,000 crore through company bonds in the primary quarter.

The quarter additionally noticed new issuers like Patanjali Ayurved Ltd and Welspun Enterprises Ltd.

In March this 12 months RBI launched the TLTRO below which banks can entry three 12 months cash upto ₹1 lakh crore to take a position in company bonds papers. This was adopted by one other spherical of TLTRO to facilitate funding to small and medium sized non-banking finance firms. The transfer was aimed to assist firms that are impacted by the covid-19 pandemic.

Banks have been mandated to deploy these funds inside 30 working days.

“The quarter was different due to ample liquidity. We saw a healthy level of activity in the corporate bond market despite the fact that government borrowing was also high. We expect the same trend to continue in the remaining quarters with wider participation,” stated Ajay Manglunia, head of institutional fastened revenue at JM Financial.

Banks have been the biggest buyers in these papers, whereas mutual funds have been cautious after the transfer to wind down the debt schemes of Franklin Templeton created redemption pressures on mutual funds.

“In Q1FY20, banks were active in deploying their surplus liquidity in a combination of AAA and non-AAA rated bonds through LTRO and TLTRO route. This has provided a section of non-AAA NBFC/HFC entities with liquidity on timely basis. Mutual funds, on the other hand, were focussed on deploying their inflows predominantly in AAA-rated bonds due to investor preference despite attractive credit spreads in non-AAA rated bonds,” stated Dhawal Dalal, CIO- Fixed Income, edelweiss asset administration ltd.

Borrowing value for all firms throughout scores additionally eased with yields on company papers falling by 50-100 foundation factors relying on the tenor. For occasion Reliance which raised three 12 months cash at 7.2-7.4% in April noticed the borrowing value fall to 7.05% to six.95% in May. The paper is at the moment buying and selling at 6.7%.