Nabard, REC withdraw ₹11,000 cr bond issuances after weak investor demand

NABARD and REC withdraw planned bond issuances worth Rs 11,000 crore after receiving limited bids at higher yields, reflecting cautious sentiment in the debt market

The National Bank for Agriculture and Rural Development (Nabard) and REC, both state-owned, on Thursday pulled out their planned bond issues worth a combined ₹11,000 crore after receiving a limited number of bids and that too at yields higher than what they were willing to accept, according to sources.

 

While REC’s cancelled bond issue (for ₹3,000 crore) was for two years, it raised another ₹3,000 crore through five-year bonds at a coupon rate of 7.19 per cent.

 

Nabard was looking to raise ₹8,000 crore through bonds maturing in seven years and three months.

 

Earlier, Small Industries Development Bank of India (Sidbi), another state-owned entity, on March 4 had withdrawn its planned bond issue to raise ₹8,000 crore.

 

According to market participants, activity in the bond market remains selective, with issuers able to raise funds at tighter levels, mainly in longer-tenor papers, where long-term investors have cash to deploy. However, issuers that do not attract interest from such investors are finding it difficult to raise funds at favourable rates.

 

In the short-term segment, volatility remains elevated amid global uncertainties, particularly developments related to Iran.

 

Issues will largely be limited to select public-sector undertakings (PSUs) and public-sector banks where pricing expectations between issuers and investors are aligned, they said.

 

“For the basic issue Nabard was getting 7.37 per cent and for the full amount, it was 7.57 per cent. It scrapped today’s (Thursday’s) issue and now it is looking to raise short-term funds because the demand is better there,” said a dealer at a state-owned bank.

 

“Sidbi may tap the market next week,” he added.

 

Nabard is planning to tap the market again on March 16 for the same amount through three-year bonds.

 

Separately, Export-Import Bank of India (Exim Bank) is looking to raise ₹4,000 crore through five-year bonds on the same day.

 

“The recent scrapping of multiple AAA-rated bond issues reflects the fragile sentiment prevailing in the debt market amid heightened geopolitical uncertainties. In the current environment, only a limited set of institutional investors with specific portfolio requirements are participating in primary issuances, and even they are being highly selective based on exposure limits and relative value considerations,” said Venkatakrishnan Srinivasan, founder and managing partner, Rockfort Fincap LLP.

 

“Investor appetite remains subdued, particularly when issuers seek aggressive pricing. Long-term investors are increasingly preferring infrequent issuers where spreads justify capital deployment. This disconnect between issuer expectations and investor demand has left several borrowers reassessing both the timing and tenor of their offers,” he added.