Funding towards the sector has dropped by nearly `4,000 crore in February against the funding received in January.
By Shashank Nayar
Public issuance of corporate bonds for the April-January period in FY19 amounted to be the highest in the past five years, according to Sebi data, as non-banking financial companies (NBFCs) relied on raising funds through retail issuances amid subdued lending by mutual funds to the sector.
Public issuances of corporate bonds were higher in FY14 at `33,760 crore for the April-January period amid higher volumes, as 35 NBFCs raised funds for the mentioned period, according to Sebi data.
NBFCs raised nearly `33,700 crore from retail issuances of corporate bonds for the above-mentioned period at a higher coupon rate from the previous fiscal as the sector faced shortage of liquidity and higher cost of borrowings.
Interest rates offered by NBFCs for retail NCDs ranged between 8% and 10.5% for the five-year paper, which were higher than the rates offered last year. Shriram Transport is now paying 130 basis points (bps) more than it did a year back. In April, the lender mopped up money at a rate of 9.50%; in March 2018, it had paid a coupon of only 8.10%. The cost of funds for AAA-rated NBFCs has increased by 17 bps since September 2018, when liquidity constraints were at its peak, according to experts at Care Ratings.
Long-term funding (more than one-year) by mutual funds to NBFCs fell by 13.8% to `68,501 crore in February, against `60,204 crore in September 2018, according to data. Funding towards the sector has dropped by nearly `4,000 crore in February against the funding received in January.
“NBFCs currently are in need of long-term funds which mutual funds as of now are not willing to lend, as they are still cautious and are willing to lend to NBFCs only with a strong balance sheet and robust promoter backing,” said Mahendra Jajoo, head of fixed income at Mirae Asset Global.
Approximately, 21 NBFCs have raised funds from through retail issuances – the highest in the past three fiscals till January this year. Total issuances stand to increase for the year ended March 2019 as issuances from major NBFCs like L&T finance and Shriram Transport Finance are yet to be incorporated.