Exim Bank has raised R500 crore through short-term bonds at a coupon rate of 7.95%, according to sources. The bonds come with a tenure of three years and 15 days.
“Mostly mutual funds have invested in the bond issue because of the funds available from the rollover of fixed-maturity plans (FMPs). This is why the rates have been so attractive. However, attractive rates for short-term bonds may not last long,” a source close to the development said.
Even for longer-term bonds, the borrowing costs have come down by at least 8-10 bps from April, according to bond arrangers, who say that the pricing is attractive considering that the benchmark yield, which is a proxy for determining yields for corporate bonds, has hardened after the RBI’s monetary policy.
Recently, Rural Electrification Corporation (REC) had raised R2,396 crore through 10-year bonds at a coupon rate of 8.3%. Prior to this, REC had issued 10-year bonds at a coupon rate of 8.35% earlier this year.
Bond arrangers are also of the view that yields on short tenure bonds are at attractive levels due to mutual fund investments. “Borrowing rates are low because of heavy participation by mutual fund houses. The yields on short-term bonds could rise close to 8.05 levels in about 2-3 weeks.
For longer-tenure bonds, rates are expected to remain at current levels,” said Ashish Jalan, assistant vice-president at SPA Securities.
Recently, Steel Authority of India (SAIL) and Indian Railway Finance Corporation (IRFC) issued short-term bonds at a coupon rate of 7.95%. IRFC raised R1,200 crore through two-year bonds.
State-owned Power Finance Corporation (PFC) is also looking to raise funds through short-term bonds having a maturity of three years and one month as well as two years, 11 month and 25 days, sources said. PFC is believed to have mopped up R11,000 crore in March through the bond market route, according to arrangers.