PSU NBFCs reissue bonds in Feb as fundraising limit reached for FY25

State-owned non-banking financial companies (NBFCs) have been actively reissuing their bonds in February as they approach their fundraising limits for the current financial year, according to bond market participants. Prominent AAA-rated public sector undertakings (PSUs), including Nabard and PFC, have reissued bonds this week to manage their funding requirements while adhering to regulatory constraints.

 

“Reissuances are necessary, especially for entities like PSUs. They are limited to only nine ISINs per year, so they must reissue to stay within this limit. For flow management, reissuances are essential,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.

 

Each security is assigned a unique number called ISIN (International Securities Identification Number) at the time of issuance to avoid any misunderstanding among traders.

 

Nabard reissued its 7.53 per cent bonds maturing in 2028 at a cutoff price of 100.05, raising Rs 4,500 crore. Additionally, LIC Housing Finance Ltd reissued its 7.74 per cent bonds, originally issued on August 29, 2024, and maturing on February 11, 2028. The reissue had a price-based cutoff, with Rs 1,003 crore accepted at a price of 100.15, resulting in a calculated yield of 7.68 per cent YTM (yield to maturity).

 

Additionally, REC accepted a 15-year issuance of Rs 2,595 crore at a yield of 7.28 per cent. The company also reissued bonds worth Rs 2,685 crore at a price of 100.46, at 7.45 per cent.

 

“Most of the issuances come till December. After that, if the entities see a favourable market condition, they issue bonds. The last quarter usually sees less activity. All these reissuances were on the day after the rate cut,” said a dealer at a state-owned bank.

 

Corporate bond fundraising had surged to a three-month high in December, driven by quarter-end demand, increased issuances from NBFCs, and strong interest from long-term investors, experts said.

 

According to Prime Database, corporates and banks raised Rs 1.05 trillion during the month, the highest since September, when issuances stood at Rs 1.23 trillion. In 2024, total corporate bond issuances reached a record Rs 10.66 trillion.

 

NBFCs accounted for approximately 60 per cent of the total issuances as they actively tapped the market to diversify their borrowing mix following the Reserve Bank of India’s (RBI) decision last year to increase the risk weight on bank loans to them.