Funds snap up papers as NBFCs, housing finance companies raise Rs 4,000 crore

MUMBAI: India’s short-term debt markets showed tentative signs of revival Tuesday after two frenetic days of selling either side of the weekend, with non-banking finance companies (NBFC) such as Indiabulls Housing Finance raising about Rs 4,000 crore collectively from mutual funds in negotiated deals.

“The primary commercial paper market is coming back to life despite uncertainties,” said Mahendra Kumar Jajoo, headfixed income, Mirae Asset Global Investments. “This should help stabilise investor sentiment going forward, as the primary market is showing some signs of improvement.”

HDFC subsidiary Gruh Finance, Aditya Birla Finance, and Indiabulls Housing were among the first few NBFCs to raise money in the commercial paper (CP) market that saw virtually no fresh issues over the past three-four trading days from NBFCs. L&T-backed Nabha Power, Sundaram Housing Finance, and Tata Power too raised money by selling the short-term debt instruments.

Bhopal Municipal Corp, meanwhile, sold long-maturity municipal bonds, offering what a source called “not out of the sync” market rates despite the difficult times.

Daily trading volumes in CPs nearly doubled to Rs 10,900 crore Tuesday compared to Rs 5,500 crore last Friday, dealers said. Corporate bonds showed a 44 per cent rise in daily trading volumes on Tuesday, at about Rs 6,500 crore, which is equal to the daily average in August.

CPs and certificates of deposits yielded about 50-60 basis points more since Monday, with investors turning cautious.

“Sporadic issuances have now begun,” said Lakshmi Iyer, chief investment officer (debt) & head products at Kotak Mutual Fund. “Funds sitting on liquidity are engaged in value buying.”

Gruh Finance raised about Rs 1,000 crore from institutional investors such as SBI Mutual Fund and Kotak Mutual Fund.

Indiabulls Housing Finance collectively raised Rs 2,250 crore via twomonth CPs in two-three tranches. It offered 8.05-8.36 per cent to raise twothree-month money. Five mutual funds are said to have invested in these papers.

The likelihood of the IL&FS contagion spreading further and the usual cash crunch arising from advance tax liabilities dictated trading. The central bank announced open market operation (purchase) for Rs 10,000 crore, a move aimed at infusing liquidity.

“We have more than sufficient liquidity on our balance sheet,” said Gagan Banga, VC of Indiabulls Housing Finance. “After servicing all our liabilities for the next six months, we will have cash on our balance sheet, assuming no inflows from borrowings or customer repayments… Further, we prefund Axis Bank Trustee (who manages our liability repayments) 7 days in advance on a rolling basis of all our liability repayments to mitigate operational risks.”

Tata Power raised about Rs 600 crore with its CPs offering 8.16 per cent for two-month maturity. In the late evening Gruh raised another Rs 300-400 crore.

Until Tuesday, fund houses were seeking to hold more cash, cutting bond holdings, particularly from NBFCs. The benchmark bond yield was a tad up at 8.13 per cent Tuesday.

To be sure, elevated yields did not stop Bhopal Municipal Corp from raising Rs 175 crore from the exchange-traded platform. Axis Bank and Trust Cap helped the municipality raise the 10-year money.