Jio Finance likely to delay its maiden bond issue of Rs 3,000 crore

Jio Finance, a wholly owned subsidiary of Jio Financial Services, is likely to delay its maiden bond issue of ₹3,000 crore, originally scheduled for this month.

 

The decision comes amid expectations of softening yields in April because the Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) is widely expected to cut the policy repo rate by another 25 basis points, sources said.

 

The company intended to raise funds through five-year bonds.

 

The MPC had cut the rate by 25 basis points in February.

 

“There are few days left in the financial year (FY25). Liquidity conditions will ease and after the rate cut, yields will soften,” a source said.

 

“They (Jio) recently issued CP (commercial paper) and might wait for April to issue bonds,” the person added.

 

“The company might look at market conditions before (issuing bonds),” another source said.

 

The firm’s bonds are rated “AAA”, while the rating for commercial paper (CP) is “A1+”, given by Crisil and Care.

 

Jio Financial Services did not reply to a Business Standard email for comment.

 

The company tapped the debt market last week with its maiden CP, raising ₹1,000 crore at a yield of 7.80 per cent.

 

The yields on AAA-rated corporate bonds have hardened by 15 basis points since February so far.

 

This resulted in many issuers accepting only partial subscriptions, forcing them to return to the market with follow-on issuances to meet funding targets.

 

Due to yields hardening for long-tenor bonds, major state-owned issuers have been tapping the market to raise funds through medium- and short-tenor instruments despite higher yields. This is a shift from their usual preference for long-tenor debt because an oversupply of such bonds has driven yields higher.

 

Expectations of successive rate cuts by the RBI in April and June have prompted issuers to opt for shorter tenures. Borrowing long-term will be more cost-effective once yields on longer-tenor bonds decline after the rate cuts, said market participants.

 

Despite a rate cut in February, the yields on corporate bonds, including state-government securities, moved up due to oversupply and tight liquidity conditions.

 

Net liquidity in banking was in deficit at ₹2.26 trillion on Tuesday, according to the latest data by the RBI.

 

Most of the issues in the past two months were by state-owned non-banking financial companies (NBFCs), which had postponed their borrowing until the end of January and February due to geopolitical uncertainties. Market participants noted that with the financial year nearly over, these NBFCs were making a final push to complete their borrowing.

 

Additionally, heavy supply at the weekly state-government bond auction, coupled with weak investor demand, pushed yields on them higher.

 

The yield spreads between state-government securities and corporate bonds have widened from 30-35 basis points (bps) to 45-50 bps.

 

So far in FY25 (until February), issues of corporate bonds reached ₹9.6 trillion and are expected to surpass the ₹10.19 trillion raised in FY24 by the end of this financial year.

 

The amount raised in FY24 through bonds was the highest since FY20.

 

In FY25, fundraising through bonds by companies topped ₹1 trillion in four months — July, September, December, and February.