Reliance Industries (RIL) on Tuesday raised over Rs 10,000 crore via short-term bonds that saw its yields drop by about 25 basis points compared to last month, according to information provided by dealers.
Dealers told FE that RIL raised Rs 4,235 crore at 7.05% via 3-year and 4-month papers, while it raised Rs 825 crore at 6.95% via 3-year paper. The firm also raised about Rs 5,000 crore at 6.95% via papers having a tenor of about 2 years and 10 months.
In April, the firm had raised close to Rs 8,510 crore via a two-part bond issue having a tenor of three years. Of the two-part issue, the one with a fixed rate had commanded a yield of 7.20% at the time. As a result, the firm has seen about 25 bps drop in the yield on its short-tenor papers.
Ajay Manglunia, MD and head of institutional fixed income at JM Financial, said that the market is slowly getting adjusted to the additional borrowing and although the impact of the announcement was seen on long-tenor bonds, short-term yields are more or less intact. “The RIL bond issue on Tuesday saw good demand. The firm has properly structured the tenors as per the investor appetite and that could be one of the contributing factors to such a strong response that allowed it to raise such a large quantum in a single day,” Manglunia said.
Meanwhile, IREDA is believed to have withdrawn its bond issue that included 3-year and 5-year papers as bids were higher than the issuer’s expectations, according to dealers. “There is always some difference between the yield on a PSU paper and a private sector paper. Although PSU papers usually get lower yields, I think the bid yields on IREDA were a bit higher on Tuesday than what they would have liked them to be,” a dealer said.
Market participants say that although some firms can choose to hit the market at an appropriate time, there are entire sectors that are starved of cash and though some of these firms may be ready to raise funds at higher rates, they are facing continuous credit risk aversion by investors.
Mihir Vora, director and CIO, Max Life Insurance, said sectors like NBFCs, real estate, hotels, airlines, etc are facing credit risk aversion from investors as the Covid impact is elongated. “Unless the government comes out with some sort of credit underwriting and industry support to mitigate credit risks, I think the market will continue with risk aversion and we will see polarisation towards highly safe and liquid papers,” Vora said.