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<\/p>\nDays after JP Morgan announced the inclusion of government bonds in its emerging market (EM) bond index, a host of banks and other financial institutions (FIs) are set to tap the debt market.<\/p>\n
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They plan to raise Rs 18,000 crore by issuing non-convertible debentures (NCDs) and bonds.<\/p>\n
National Bank for Agriculture and Rural Development (Nabard) plans to raise up to Rs 3,000 crore via five-year social impact bonds on Tuesday, the first of its kind in India.<\/p>\n
Market participants anticipate strong investor demand for Nabard’s social sector bond.<\/p>\n
This is primarily due to the tenure, which is expected to resonate with mutual fund houses as well as long-term investors, including insurance companies and pension fund houses.<\/p>\n
“There is some buoyancy in the market in the last couple of days or weeks.<\/p>\n
“The market was unstable and yields were moving up. Investors were uncertain whether the rates were going up or down. So, they were holding on.<\/p>\n
“But now, with this global index inclusion, everybody who was waiting for a good appetite has started coming to the market,” said Ajay Malglunia, managing director (MD) and head investment grade group at JM Financial.<\/p>\n
“Banks are seeing good credit off-take across sectors, including infrastructure.<\/p>\n
“And, infra bonds make a lot of sense for the banks to raise money because they don’t have application of statutory liquidity ratio (SLR) requirement.<\/p>\n
“It is cheaper money compared to the short-term rates.<\/p>\n
“It is a 7.49 per cent kind of a level for State Bank of India (SBI) infra bonds.<\/p>\n
“Everybody is following the leader, especially when they see SBI is able to raise so much money so quickly,” he added.<\/p>\n
Recently, REC is inviting bids for its perpetual bonds, with a target to raise up to Rs 2,000 crore through the issue.<\/p>\n
Lenders who were previously awaiting SBI’s cut-off are ready to tap the market during the week.<\/p>\n
Punjab National Bank plans to raise up to Rs 3,000 crore via perpetual bonds on Tuesday, whereas Canara Bank plans to raise up to Rs 5,000 crore via 10-year infra bonds.<\/p>\n
Kotak Mahindra Investments plans to raise up to Rs 540 crore via three-year and two-year bonds, with coupon rates of 8.0359 per cent and 8.0415 per cent, respectively.<\/p>\n
On Friday, SBI successfully issued its second tranche of infrastructure bonds.<\/p>\n
It raised Rs 1,000 crore through 15-year bonds at a coupon of 7.49 per cent, which was better than what the market had expected.<\/p>\n
“The corporate bond market is buoyant after the announcement of JP Morgan’s bond index inclusion.<\/p>\n
“With increasing credit growth and negative liquidity in the banking system, the corporate entities are desperate to raise funds from the bond market.<\/p>\n
“Investor appetite, too, has increased since then, specifically in longer tenor instruments with highest credit rating.<\/p>\n
“Corporate bond issuers were rushing to tap the bond market to make use of increasing investor demand post announcement of the index inclusion.<\/p>\n
“And, the Reserve Bank of India (RBI) is allowing banks to keep corporate bonds in HTM category,” said Venkatakrishnan Srinivasan, bond market veteran, founder and managing partner of Rockfort Fincap LLP.<\/p>\n
JP Morgan had announced the inclusion of India in its widely followed emerging market bond index on Friday.<\/p>\n
JP Morgan has included India in its flagship index GBI-EM Global Diversified index.<\/p>\n
India will join the index with 1 per cent weight in June 2024.<\/p>\n
The weight will increase by 1 per cent each month until 10 per cent in April 2025.<\/p>\n