Bond issuers are raising less than the target from the market as volatility has increased and yields have hardened.
HDB Financial Services, a non-banking financial company (NBFC) floated by the country's largest private sector lender, HDFC Bank, mopped up only Rs 720 crore against its intent of taking up to Rs 1,800 crore through 23-month non-convertible debentures (NCDs).
The privately placed bonds of HDB Financial had a base issue size of Rs 600 crore, plus a green shoe option of Rs 1,200 crore. The coupon (also known as yield) was fixed at 7.7 per cent. HDB’s paper carries an “AAA” rating from CRISIL, which on September 1, assigned a rating for Rs 20,000 crore worth of NCDs.
In another case, large mortgage lender LIC Housing Finance raised Rs 941 crore against an indicative amount of Rs 1,500 crore. This bond with 59-month maturity, which was also placed privately, had a base issue size of Rs 500 crore, plus a green shoe option of Rs 1,000 crore. The coupon (also known as yield) was fixed at 7.77 per cent.
Bond market dealers said the big-ticket fundraise had slowed down. Only small-ticket issues are going through. For instance, Varroc Engineering raised Rs 250 crore through a five-year bond at a coupon of 9.2 per cent. Its NCDs carry an “A+” rating from India Ratings.
Microfinance company Spandana Sphoorty raised Rs 100 crore through debentures having an 18-month maturity at a coupon of 10.43 per cent. The debentures carry an “A” rating from India Ratings, bond dealers said.
Given the volatility — yields moving up and down by 25-50 basis points in a week — issuers have become cautious. They are sticking to a pre-arranged point for the coupon and when the issue opens for bidding, they will take higher amounts only if the yields sought are near the pre-arranged level. They have refrained from going for higher yields.
The issuers are looking for stability. However, the rising crude oil prices and ups and downs in global markets have made the outlook uncertain, said a senior executive with a bond placement firm.