MUMBAI: Elevated yields in the corporate bond market and the scrapping of four planned issues within three weeks have led some issuers to delay big-ticket fundraising until the next quarter, merchant bankers and investors said.
Firms including Micro Units Development and Refinance Agency (MUDRA), Indian Bank and ONGC Petro additions have postponed debt sales worth 150 billion rupees ($1.68 billion) to the January-March quarter, that were originally planned for before the end of December.
Many non-banking finance companies have also chosen to wait for the next quarter to tap the market.
Yields on AAA-rated corporate bonds have spiked by 20-30 basis points this month.
"Investors are demanding higher yields even from AAA-rated issuers due to a combination of tight systemic liquidity, elevated government bond yields, and heightened risk aversion," said Amar Ranu, head of investment products and insights at Anand Rathi Shares and Stock Brokers.
Through the last three weeks, Power Finance Corp has withdrawn its planned issuances on two occasions, while Indian Railway Finance Corp and SIDBI have each canceled their bond sales as investors demanded higher returns, which the companies were not willing to give.
The three firms canceled bond sales worth an aggregate of 225 billion rupees with tenors across a range of maturities.
"Global uncertainty, tight domestic liquidity, rupee volatility and foreign capital outflows have kept investors cautious, resulting in elevated yields contrary to market expectations post RBI policy," said Vinay Pai, head of fixed income at Equirus Capital.
SILVER LINING IN LIQUIDITY
Still, the central bank's recent liquidity push could act as a silver lining for corporate bond yields, if not immediately, then in January-March.
The RBI liquidity infusion should help stabilise yields, restore confidence and support both corporate issuers and investors, Equirus Capital's Pai added. - Reuters
