Data Drive: Have fund-raising concerns for NBFCs eased?

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Published: February 23, 2019 12:42:52 AM

In January, there was an uptick in the share of corporate bond issuances by the NBFC sector, reflecting renewed confidence among issuers and investors.

Data Drive: Have fund-raising concerns for NBFCs eased? (Illustration: Shyam Kumar Prasad)Data Drive: Have fund-raising concerns for NBFCs eased? (Illustration: Shyam Kumar Prasad)

The fund-raising challenges of non-banking financial companies (NBFCs) because of asset-liability mismatch seem to have eased marginally. In January, there was an uptick in the share of corporate bond issuances by the NBFC sector, reflecting renewed confidence among issuers and investors. In fact, the proportion of fresh corporate bond issuances by NBFCs saw a notable decline from 71.6% in July last year 64.6% in August. In January, according to a CARE Ratings study, it rose to 82.2% of the corporate bond issuances.

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Similarly, the proportion of fund-raising through commercial paper for the NBFC sector was significantly low at 20%, or one-fifth of the total issuances in October last year. However, the share increased in November, before declining in the next two months.

During the peak of the liquidity crisis, NBFCs resorted to higher bank borrowings. The incremental bank borrowings rose to `56,499 crore in September last year, which was about `45,000 crore higher than the incremental bank borrowings in July. However, November and December have seen a notable moderation in incremental bank credit, indicating that NBFCs are borrowing from the bond market.

The study shows that there is more volatility in the changes in the corporate bond yields in comparison with bank rates. For AAA category, the yields which rose by around 78 basis points in October last year have seen a month-on-month decline in the following three months. The yields have declined by 37 basis points from 9.24% in October last year to 8.97% in January this year.

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