Informist, Friday, Oct 29, 2021
By Vishal Sangani
MUMBAI – Rates on commercial papers were range-bound today because of low market participation, dealers said.
Most companies remained on the sidelines noting a rise in rates, and also because they were in no immediate need of funds, dealers said.
So far today, only Godrej Industries tapped the market to raise 750 mln rupees through CPs. On Thursday, no CPs were issued by companies.
Rates on short-term debt instruments surged in the last few days as fundraising through CPs shot up after non-banking finance companies raised funds heavily for requirements related to initial public offerings.
According to market participants, non-banking finance companies have already raised 400-500 bln rupees via ultra short-term CP rates for funding initial public offerings this week.
These CPs were used to raise funds for clients subscribing to large initial public offerings of equity shares. Lenders raised funds for FSN E-Commerce Ventures Ltd, the parent company of Nykaa and Fino Payments Bank Ltd.
Demand from fund houses was low, as they have already parked a large amount of funds in ultra short-term CPs of non-banking finance companies. They are holding back their investments to maintain liquidity to invest in such issuances in the coming days, market participants said.
S.J.S. Enterprises Ltd, PB Fintech Ltd, and Sigachi Industries Ltd’s initial public offerings will open on Monday, and that of Paytm will open on Nov 8.
Fund-raising through ultra short-term CPs for the Paytm share issue is pegged at 400-800 bln rupees, depending on the grey market premium prevailing during the offer period.
Today, rates on three-month CPs of non-bank finance companies were at 4.20-4.35%, and those on papers of manufacturing companies rose to 3.80-3.95%.
Some market participants said rates also rose because of higher cut-offs set at a variable rate reverse repo auction by the Reserve Bank of India.
On Wednesday, the Reserve Bank of India had said it would conduct a 28-day variable rate reverse repo auction for a notified amount of 500 bln rupees on Tuesday.
On the other hand, no certificates of deposit were issued by banks today. Issuance of CDs has been particularly scarce due to surplus liquidity in the banking system. With growth in bank deposits consistently outpacing credit growth, banks have had little reason to tap the short-term debt market.
Liquidity in the banking system is estimated to be in a surplus of over 7.19 trln rupees as against 6.99 trln rupees on Thursday.
The surplus is expected to widen more in the coming days because of month-end spending by the government in the form of salary and pension payments.
Loan growth remained muted due to lack of demand for big-ticket loans from corporates and as banks remained cautious in anticipation of rising asset quality stress due to the COVID-19 pandemic.
Rates on three-month CDs were quoted at 3.45-3.60% in the secondary market.
–Secondary market
* IndusInd Bank’s CD maturing on Nov 8 was dealt at a weighted average yield of 3.5915%
* Bajaj Finance’s CP maturing on Nov 18 was dealt six times at a weighted average yield of 4.2510%
Following are volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India’s F-TRAC platform:
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 Snigdha Kuttikat
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