Informist, Friday, Jan 28, 2022

By Vishal Sangani

MUMBAI – Bajaj Finance Ltd tapped the market to raise 12.50 bln rupees through ultra short-term debt papers at 4.00%, dealers said. The non-bank lender issued these commercial papers to meet funding requirement for clients subscribing to large initial public offerings, including of Adani Wilmar.

Fund houses typically invest in such papers as these offer better yields in a short span of time. On Thursday, Tata Capital Financial Services Ltd had issued ultra-short term CPs at 4.50%

CP issuances for public offerings have attracted regulatory scrutiny amid concerns that excess systemic liquidity could be feeding into inflation, equity valuations, and IPO pricing. On Oct 22, the Reserve Bank of India had capped the amount non-banking financial companies can offer on such papers to 10 mln rupees per borrower, effective Apr 1.

Meanwhile, the amount raised through issuance of CPs declined today because of lower market participation amid low requirement for funds and subdued demand from mutual funds, dealers said.

Demand from mutual funds was low as they held back investments to maintain liquidity in such issuances in the coming days. 
 

So far today, CPs aggregating 29.50 bln rupees were issued, as against 37.25 bln rupees on Thursday. Bharat Heavy Electricals was the major issuer, raising 10.00 bln rupees through papers maturing on Mar 28 at 3.92%.

Participation was low today as companies remained on the sidelines because of elevated rates.

Rates on short-term debt papers had surged on Thursday as the liquidity surplus in the banking system narrowed, and demand from mutual funds was low.

Liquidity in the banking system is currently estimated to be in a surplus of over 5.19 trln, against 5.49 trln rupees on Tuesday. The surplus narrowed because of outflows on account of payments towards bonds auctioned by the central and state governments.

Rates on three-month CPs of manufacturing companies were quoted at 4.05-4.20%, while those on papers of non-bank financial companies were at 4.25-4.40%.

Rates on three-month certificates of deposit were quoted at 3.80-4.00% in the secondary market.

--Primary market

* JK Cement, Bajaj Finance, Bharat Heavy Electricals, Indian Oil Corp raised funds through CPs.

--Secondary market

* HDFC Bank's CD maturing on Apr 28 was dealt five times at a weighted average yield of 3.8870%

* Larsen & Toubro's CP maturing on Mar 29 was dealt twice at a weighted average yield of 3.7299%

Following are the volumes at 1530 IST in the secondary market for short-term debt, in bln rupees, as detailed by the Clearing Corp of India's F-TRAC platform:

NOTE: Details of the deals have been received from market sources.

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Tanima Banerjee

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