Steel Authority of India (SAIL) on Thursday postponed its bond issuance after investors sought yields higher than what the company was offering on the short-term bonds.
According to bond arrangers, SAIL was planning to raise between R1,000 and R1,500 crore at 8.25-8.30% for bonds having a term of three years. However, investors bid in the range of 8.43-8.72%.
“With the benchmark yield close to 8%, investors were expecting at least a 40-bps spread,” said a bond arranger. Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) that are regular borrowers in the market are also likely to tap the bond markets soon, bond arrangers said.
Earlier, SAIL had issued bonds at 7.95% in early April through short-tenure bonds. That was when mutual funds had invested rollover funds from fixed maturity plans (FMP) into the short-term bonds pushing the yield downwards.
In last few days, yields had seen a surge as bonds saw a selloff worldwide and rupee weakened with rising oil prices leading to inflationary concern. The 10-year benchmark yields fell 10 basis points on Thursday to close at 8%.
Bond arrangers have indicated that a few PSUs are in line to tap the bond market. Two subsidiaries of Power Grid Corporation (PGC) — Vizag Transmission and NM Transmission company — are also looking to raise R200 crore each with an option to retain over-subscription, they said.
Nuclear Power Corporation of India (NPCIL) is also likely to hit the bond markets in the first week of June, according to a source.
NPCIL may hold a committee meeting later this month to decide whether to borrow through a term loan or bonds.
A source said the company may opt for a loan even if it was more expensive since it would have the option to repay the loan at an earlier stage.
“If we raise bonds, we would be stuck with them till the tenure ends. We do not usually opt for a call option where the issuer has the option to redeem the bond before its redemption date,” the source said.
NPCIL is expected to borrow more this year than the last year.
It had borrowed R6,400 crore last year, of which R4,400 crore was through the bond market in two different issuances.
For Updates Check Company News; follow us on Facebook and Twitter