Indian companies make a beeline to raise funds from debt capital market

According to a dealer at a state-owned bank, some of the AAA-rated issuers who tapped the market today were expecting to raise funds at the levels they normally raise

A range of institutions, including state-owned Power Finance Corporation (PFC), Punjab National Bank (PNB), Small Industries Development Bank of India (Sidbi), TATA Capital, and India Infra Debt, raised funds from the domestic debt capital market on Friday. Looking ahead, several large issuers are preparing for upcoming issuances, with Power Grid Corporation of India (PGCI), Housing and Urban Development Finance Corporation (Hudco), and Indian Railway Finance Corporation (IRFC) among those scheduled to tap the market next week.

 

PFC raised Rs 5,245 crore through bonds with two different maturities. The company raised Rs 2,700 crore through 15-year bonds, maturing in 15 years and 24 days, at a coupon rate of 7.16 per cent, and Rs 2,545 crore through 5-year bonds, maturing in 5 years and 23 days, at a coupon rate of 7.40 per cent, according to sources.

 

The state-owned firm had initially planned to raise Rs 6,000 crore through a combination of 15-year and 5-year bonds, with a base size of Rs 500 crore for each tranche and a green shoe option of Rs 2,500 crore. PFC is a non-banking financial company (NBFC) that specialises in providing financial support to power and infrastructure sectors.

 

Meanwhile, Sidbi, which was eyeing Rs 4,000 crore — base issue of Rs 1,000 crore and green shoe option of Rs 3,000 crore — raised Rs 3,700 crore through bonds maturing in 4 years and 5 months at a coupon rate of 7.48 per cent. Sidbi acts as the principal financial institution for promotion, financing and development of the micro, small and medium enterprise (MSME) sector as well as for coordination of functions of institutions engaged in similar activities.

 

Separately, state-owned PNB raised Rs 3,000 crore through Tier-II bonds at a coupon rate of 7.43 per cent. Tier-II bonds have a maturity of 15 years, with a call option of 10 years.

 

“The Federal Open Market Committee (FOMC)’s hawkish commentary, despite a 25 basis points (bps) rate cut, drove US Treasury yields higher and pressured the rupee. Indian government bond yields in the 10-year+ segment reacted negatively, climbing at least 5 bps. This volatility spilled over into AAA-rated PSU bonds, where yields edged higher, amplified by sustained primary market issuances,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.

 

The Federal Reserve earlier this week cut interest rates by 25 bps but guided for only two cuts (50 bps) in 2025 rather than the earlier expectation of four cuts (100 bps), and raised the inflation forecast. This hawkish commentary by the Federal Reserve pushed up US yields. Indian government securities yields also inched up following this trend.

 

“Issuers today (Friday) navigated pricing headwinds by either accepting partial bids within their comfort zones or fully subscribing where alignment with targeted levels was achieved. Cutoff yields mirrored the upward shift in government bond yields, reflecting supply-demand imbalances and tight system liquidity,” Srinivasan added.

 

According to a dealer at a state-owned bank, some of the AAA-rated issuers, who tapped the market on Friday, were expecting to raise funds at the level they normally raise. So, whatever funds they got at their desired cutoff, they raised it, rest they let go of. The dealer also pointed out that the high volume of issuances in the market resulted in some issuers being unable to secure their desired rates for the full amount they intended to raise.

 

In the coming week, at least three large issuers — Hudco, PGCI, and IRFC — are eyeing to raise Rs 9,750 crore. While IRFC, which raises funds from the capital market for augmenting railway plan finances, is looking to raise Rs 3,000 crore (base size of Rs 500 crore and green shoe option of Rs 2,500 crore) through 10-year bonds, Hudco is eyeing Rs 2,500 crore through 10-year bonds, and PGCI is aiming for Rs 4,250 crore through bonds maturing in 10 years.   

Tapping into the space

  - Power Finance Corporation raised Rs 5,245 crore through bonds with two different maturities

  - Sidbi raised Rs 3,700 crore through bonds maturing in 4 years and 5 months

  - PNB raised Rs 3,000 crore through Tier-II bonds 

- Next week, Hudco, PGCI, and IRFC are eyeing to raise Rs 9,750 crore