Bonds that are worth more ₹30,000 crore issued by banks and non-bank financial companies (NBFCs) are expected to hit the market later this week as they seek to raise funds at lower interest rates ahead of a possible rate hike this month, according to two investment bankers.
The majority of bonds will be issued by NBFCs and will have terms of five years and longer, they said.
HDFC will issue non-convertible debentures (NCD) with a term of 10 years ₹10,000 crores, HDFC Bank will issue additional Tier 1 Bonds worth ₹3,000 crore and Small Industries Development Bank of India set to issue bonds worth 42 months ₹4,000 crore.
“People have the impression that the rate cycle is stable. The mandate has gone down. There is stability in the market,” said a public sector bank treasury official, speaking on condition of anonymity. cheaper than corporate bond yields,” he said.
Among the banks, State Bank of India, HDFC Bank and Bank of Maharashtra are expected to hit the market with AT1 bonds of over ₹10,000 crores this week.
Bank of Baroda, Punjab National Bank and Canara Bank have already tapped the AT1 bond market.
Public sector banks are expected to increase ₹20,100 crore through AT1 bonds in the current financial year (FY23) to meet growth needs, according to rating agency ICRA Ltd.
Yields on AT1 bonds are down to 7.8-7.95% from levels of 8-8.75%.
“As the rate trajectory is stable and the story of India’s inclusion in global indices is turning with better odds this time, everyone is optimistic. A stable rate trajectory and lower crude help a lot. We’ll learn from the policy meeting at the end of the month. Due to lower inflation, a rate hike or a hawkish stance may fade a bit. Investors and traders don’t want to miss the bus “said Ajay Manglunia, managing director of JM Financial Ltd.
According to Primedatabase, corporate bonds are worth ₹1.45 trillion has been raised since June. This is 15% more than a year ago.
That said, industrial credit growth accelerated to 10.5% in July from 0.4% in July 2021. Large industrial credit grew 5.2% from a contraction of 3 .8% the previous year.
Overall credit growth stood at 15.1% year-on-year in July, down from 13.7% in June.
The services and industrial sectors led credit growth in July, followed by agriculture and retail trade.
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