In the recent time, this is the first instance when a top-rated corporate raised long term money in domestic market at rate lower than sovereign papers.
This fundraising points to a possible corporate bond market rally, lowering funding costs for borrowers.
When bond yields fall prices rise.
IRFC raised Rs 1,375 crore with 20.1 year maturity via local bonds that offered 6.80 percent. A government paper maturing in 2041 yielded 6.80 percent semi-annually in the secondary market, which is annualised at about 6.90 percent, show data from the Clearing Corporation of India.
EPFO, the largest debt investor in the country, is believed to have bought a lion’s share of the primary deal, market participants said. EPFO could not be contacted immediately for comments. The retirement body earlier decided to deliver 8.50 percent return on provident fund deposits.
“It is a demand supply equation at play,” said Ajay Manglunia, managing director – debt capital market, JM Financial. “Long term institutional investors have money to invest, but primary issuances are not rising. This has left those investors with little choice amid a pool of surplus liquidity.”
The existing IRFC bonds with similar maturity are yielding in the range of 7-7.05 percent. Bond dealers expect a rally in the corporate bond market after Friday’s primary market deal.
“Existing investors of IRFC will try to sell at lower yields seeking trading gains,” said a dealer with a larger bank.
