Large corporates such as Bharti Airtel and lending institutions like Bank of Baroda, Canara Bank and Small Industries Development Bank Of India (SIDBI), among others, have raised Rs 45,493 crore via bonds since November 17, a day after the Reserve Bank of India (RBI) hiked risk weights on unsecured credit, data compiled by FE showed. The quantum is significantly higher than Rs 24,161.3 crore raised in October.
Canara Bank and Bank of Baroda raised Rs 5,000 crore each via infrastructure bonds at 7.68% coupon rate in late November. SIDBI, too, raised Rs 4,887 crore at 7.83% coupon. Bharti Airtel, meanwhile, raised Rs 8,000 crore via NCDs in three separate tranches on December 1 at an average yield of 8.95%.
Ajay Manglunia, MD and head of investment grade group at JM Financial, said the RBI’s circular has raised the capital needs of lenders, apart from their regular funding needs. “The credit growth is high and all lenders need funds to meet the demand. This provisioning requirement has led to higher capital burn and lenders are accordingly building a cushion.” He added the RBI’s hike in risk weights has led to a 25-50-bps rise in the borrowing cost of NBFCs from banks, and about 20- 25-bps rise in NBFCs’ debt market borrowing cost. “We will likely see 15%-20% more issuances over the last year. The market is likely to be stable which will aid corporates to raise debt in a non-disruptive manner,” Manglunia said.
“The RBI’s circular on higher risk weightages has enhanced the supply of bonds. Though most banks and NBFCs are well capitalised, the market expects more supply of bonds in coming days,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP, a debt advisory firm. Systemic liquidity deficit touched an all-time high of Rs 2.34 trillion in late November and affected the money market yields by 10-15 bps, he said.
As per sources, Canara Bank will likely issue another Rs 3,500 crore via additional tier-I bonds on December 7, Rural Electrification Corp will raise up to Rs 2,000 crore on December 8 and Bank of Maharashtra may issue tier-II bonds amounting to Rs 1,000 crore on December 12.