Awash With Cash, Debt St Lures Lesser Firms

AAA-rated companies have always been the preferred customers on Debt Street. But a surfeit of cash has ensured that even their less fancied brethren, the AA-rated firms, too, are getting loan rates they could only dream of before.

A case in point is the AA+ rated Finolex Cables. The Pune-based company today placed a three-year non-convertible debenture (NCD) at a coupon of 8.15 per cent.

This is the cheapest three-year loan raised by an AA+ rated company ever. The issue was arranged by Citibank.

As the interest rates in the corporate bond market has been declining continuously, at least three more corporate entities -- Reliance Industries Ltd, Finolex Cables and Larsen and Toubro (L&T) -- hit the market today with papers bearing very fine coupons.

 

The AAA-rated Reliance has placed Rs 50 crore 5-year non-convertible debentures (NCD) at eight per cent. The sole arranger to the issue was Citibank. The coupon of the paper is just five basis point higher than Hindalco issue of Rs 100 crore, launched on Tuesday.

L&T has also hit the market with p1+ rated Rs 15 crore commercial paper at 6.66 per cent. The L&T issue is the cheapest CP raised by any company ever and the coupon is only 16 basis point higher than the bank rate.

The coupon of the Rs 100 crore IDFC issue which was launched on July 8 has been fixed at 8.05 per cent. The paper has a tenure of 4 years and 11 months and is arranged by StanChart. Earlier, IDFC had been looking at a band of eight per cent to 8.15 per cent.

As the yields of the government paper have bottomed out, investors are taking interest in the bond market and it has caused a sharp fall in the corporate bond yields. The gap between five-year corporate paper and government securities is also narrowing sharply.

It was 190 basis points in April and 105 basis points now. The secondary market yield of the AA-rated papers have also come down from 9.50 per cent to 8.32 per cent.