Short-Term Debt: Big issue by L&T lifts CP amount up, rates flat

Informist, Wednesday, Aug 30, 2023

By Asmita Patil

MUMBAI – Fundraising by commercial papers rose today on the back of big ticket issuance by Larsen & Toubro, dealers said. So far in the day, financial institutions have raised 16.50 bln rupees through CPs, as compared to 9.75 bln rupees on Tuesday.

Larsen & Toubro raised around 11 bln rupees through papers maturing in three months at a coupon of 7.02%. 

Banks continue to tap the short-term debt market to raise funds amid liquidity crunch. Today AU Small Finance Bank raised 2 bln rupees through certificates of deposit maturing in six months at 7.60%, and Canara Bank raised 21 bln rupees through papers maturing in six months at 7.20%, dealers said. 

Last week, liquidity in the banking system had slipped into a deficit for the first time in the current financial year started April due to the incremental cash reserve ratio and monthly outflows on account of goods and services tax. 

Liquidity conditions have improved this week on account of inflows for month-end spending in the form of salary and pension payments by the government. 

At the start of trade today, liquidity in the system was estimated to be in a surplus of 412.83 bln rupees, higher than 260.16 bln rupees on Tuesday.

Surplus liquidity remained above 1 trln rupees throughout July due to robust inflows on account of government spending, leading to a fall in issuance of CDs by 11% on year to 455.55 bln rupees. 

Rates on short-term papers remained flat, dealers said. Rates on three-month CPs issued by non-banking financial companies were quoted at 7.20-7.40%, and rates on papers of manufacturing companies were 7.10-7.30%.

Rates on three-month certificates of deposit were quoted at 7.00-7.20%. Punjab National Bank and IDFC First Bank raised funds through CDs.

–Primary market

* Godrej Housing Finance, Larsen & Toubro, and Tata Capital Financial Services raised funds through CPs. 

* AU Small Finance Bank and Canara Bank raised funds through CDs. 

–Secondary market

* Bank of Maharashtra’s CD maturing on Thursday was dealt nine times at a weighted average yield of 6.7909%.

* Tata Power Co’s CP maturing on Thursday was dealt twice at a weighted average yield of 6.7903%.

At 1700 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

58.55

43.9549.6039.28

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

End

Edited by Vidhi Verma

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