By Dharamraj Dhutia
MUMBAI (Reuters) – Indian state-run companies are set to borrow nearly $2 billion via the bond market early next week after the central bank cut interest rates for the first time in nearly five years.
Four state-run firms REC, IIFCL, HUDCO and SIDBI are looking to raise a total of up to 170 billion rupees ($1.94 billion) through Monday and Tuesday, according to merchant bankers.
Overall, companies raised around 125 billion rupees via bonds this week, compared with the typical weekly issuance range of 50-100 billion rupees.
The companies did not respond to Reuters emails seeking comments.
Earlier in the day, the Reserve Bank of India cut its key policy rate for the first time in nearly five years and signaled a less restrictive policy approach ahead to provide stimulus to the sluggish economy.
Governor Sanjay Malhotra also said the RBI will continue to monitor liquidity and financial market conditions and proactively take appropriate measures to ensure orderly liquidity conditions.
The central bank has already announced an infusion of close to 2 trillion rupees of durable banking system liquidity since the last month.
Bond yields rose after the policy decision as the central bank did not announce any additional liquidity measures along with the rate cut, which was already priced in.
“Market sentiment is expected to stabilise next week ahead of bidding,” said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.
Even as state-run companies generally prefer longer duration debt, of the total fundraising over the next two days, 110 billion rupees are being targeted through shorter duration debt.
“We expect robust demand from key investors such as provident funds, insurance companies, mutual funds, and banks for these issuances,” said Suresh Darak, founder of Bondbazaar, an online bond trading platform.
Mutual funds have preferred to remain invested in shorter duration high-rated corporate bonds, as they anticipate more liquidity infusion bodes well for this part of the yield curve.
“The RBI also continues to remain comfortable on the domestic growth outlook. This indicates a shallow rate cut cycle ahead. Hence we continue to prefer short to medium duration products given the favourable risk reward,” Anurag Mittal, head of fixed income at UTI Asset Management.
($1 = 87.4400 Indian rupees)
(Reporting by Dharamraj Dhutia;Editing by Saumyadeb Chakrabarty)
