Short-Term Debt: Reliance Retail Ventures top CP issuer; CP rates dn

Informist, Wednesday, May 31, 2023

By Vishal Sangani

MUMBAI – Funds raised through commercial papers shot up today, following a large issuance by Reliance Retail Ventures. Reliance Retail raised 50 bln rupees at 7.05% through papers maturing in three months. The company tapped the market to meet its funding needs and to roll over papers set to mature in the coming days, dealers said.

A few non-banking financial companies also raised funds to meet their credit disbursement requirement.

So far today, CPs aggregating 71 bln rupees were issued, against 13 bln rupees on Tuesday. Bajaj Finance raised 9.50 bln rupees through papers maturing in three months at 7.05%.

The supply of papers by big-ticket issuers was readily absorbed because of their low-risk profile.

Despite surge in issuances, rates on CPs declined due to steady demand from mutual funds and also liquidity surplus widened, dealers said.

There is a steady inflow in liquid funds of mutual funds, which they are deploying in such papers. They are also reinvesting the funds received from maturity of short-term papers.

Rates on three-month CPs issued by non-banking financial companies were down at 7.15-7.30% from 7.25-7.40% on Tuesday, while rates on papers of manufacturing companies fell by five basis points to 7.05-7.25%.

Liquidity in the banking system is currently estimated to be in a surplus of 1.35 trln rupees, up from 1.04 trln rupees on Tuesday. The surplus widened due to month-end spending by the government in the form of salaries and pension payouts.

A few dealers said surplus liquidity may also increase due to deposits received from 2,000-rupee banknotes.

On May 19, the central bank had announced the withdrawal of 2,000-rupee denomination banknotes from circulation by Sep 30. However, it clarified that these banknotes would continue to be legal tender. The public can deposit 2,000-rupee banknotes into their bank accounts or exchange them with banknotes of other denominations at any bank branch, the RBI said.

On the other hand, Indian Bank was the lone issuer of certificates of deposit today, raising 40 bln rupees at 6.98% through papers maturing in three months.

On Tuesday, Canara Bank had raised 10 bln rupees through CDs at 6.97%.

Most banks remained on sideline as there is no immediate need for funds and also surplus liquidity in the banking system.

Rates on three-month CDs were unchanged at 6.95-7.15%.

–Primary market

* Larsen & Toubro, Reliance Retail Ventures, L&T Finance, Bajaj Finance, Kotak Mahindra Prime, and Network 18 Media and Investments raised funds through CPs.

–Secondary market

* Union Bank of India’s CD maturing on Thursday was dealt two times at a weighted average yield of 6.3521%

* LIC Housing Finance’s CP maturing on Jul 31 was dealt at a weighted average yield of 6.3886%

At 1630 IST, following were the volumes, in bln rupees, in the secondary market for short-term debt, as detailed by the Clearing Corp of India’s F-TRAC platform:

Certificates of deposit

Commercial papers

Today

Previous

Today

Previous

26.0532.3512.3524.00

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Manisha Baxla

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