Short-Term Debt: CP supply up as NBFCs tap market for IPO funds

Informist, Tuesday, Oct 26, 2021


By Vishal Sangani


MUMBAI – Fundraising through commercial papers shot up today as Bajaj Finance Ltd, Tata Capital Financial Services Ltd, and IIFL Finance Ltd raised funds through ultra short-term debt papers for requirements related to initial public offerings, dealers said.


The non-bank lenders raised around 180 bln rupees through ultra-short term CPs. Bajaj Finance was the major issuer, raising 70 bln rupees through papers maturing on Nov 9 at a coupon of 5.50%.


These CPs were ultra short-term ones issued by non-bank lenders to raise funds for clients subscribing to large initial public offering of equity shares. Lenders are raising funds for FSN E-Commerce Ventures Ltd, the parent company of Nykaa, whose IPO will open for subscription on Thursday and close on Nov 1.


Typically, fund houses invest in such papers as they offer better yields in a short span of time.


The amount raised through CPs also surged today because a few companies tapped the market to meet their funding requirements and rolled over papers set to mature in the coming days.


So far today, CPs aggregating 235.15 bln rupees were issued, against 88.20 bln rupees sold on Monday. National Bank for Agriculture and Rural Development raised 36.65 bln rupees at 3.70% through papers maturing in three months.


Rates on CPs surged due to low demand from mutual funds and an increase in issuances, dealers said. Demand from fund houses was low as they are holding back investments in short-term debt instruments to keep liquidity in hand for ultra short-term CPs of non-banking finance companies in the coming days, market participants said.


Fino Payments Bank's initial public offering will open for subscription on Friday, and is scheduled to close on Nov 2.


Rates on three-month CPs of non-bank finance companies were at 4.15-4.30% as against 4.00-4.15% on Monday, and those on papers of manufacturing companies increased to 3.75-3.95% from 3.65-3.85% on Monday.


Some market participants said rates also rose because of higher cut-offs set at a variable rate reverse repo auction by the Reserve Bank of India. Today, the central bank had set 3.99% as the cut-off at the seven-day variable rate reverse repo auction and 3.94% weighted average rate, higher than market expectations.


The RBI conducted a seven-day variable rate reverse repo auction today, which saw banks park the entire notified amount of 2.00 trln rupees.


Banks did not issue any certificate of deposit today as there is no immediate need for funds owing to surplus liquidity in the banking system and low credit growth. Loan growth remained muted due to lack of demand for big-ticket loans from corporates and as banks remained cautious in anticipation of rising asset quality stress due to the COVID-19 pandemic.


Liquidity in the banking system is estimated to be in a surplus of over 6.56 trln rupees as against 6.78 trln rupees on Monday.


Rates on three-month CDs were quoted at 3.45-3.60%, in the secondary market.


–Primary market

* Indian Oil Corp, TV 18 Broadcast, Berger Paints India, IIFL Finance, Tata Capital Financial Services, Birla Group Holdings, Bajaj Finance and National Bank for Agriculture and Rural Development raised funds through CPs.


–Secondary market

* Axis Bank's CD maturing on Nov 24 was dealt at a weighted average yield of 3.4800%

* Tata Motors's CP maturing on Oct 29 was dealt twice at a weighted average yield of 3.6511%


Following are 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:


Certificates of deposit

Commercial papers






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



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


Edited by Avishek Dutta


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