Power Grid, 2 PSUs Scrap Plan to Hit the Debt Road

MUMBAI: At least three firms, including state-run Power Grid Corp, Bank of Maharashtra and United Bank of India, have scrapped their planned bond sales last week, as investors sought higher yields after the Reserve Bank of India's monetary policy review indicated a pause in rate-cutting cycle.

Power Grid, which was planning to sell bonds worth up to Rs 3,000 crore, scrapped the issuance after bidders sought rates as much as 8.49%, dealers familiar with the matter told ET.

“Existing market cash-crunch has weakened investor appetite,“ said Badrish Kulhalli, fund manager-fixed income, HDFC Life Insurance, pointing out that sufficient bids were not seen for corporate bond issuances.

“Appetite for bonds may also ha ve got affected due to the higher yields prevailing for state government bonds,“ Kulhalli said.

Earlier, AA-rated Bank of Maharashtra (BoM) was seeking to raise about Rs 500-1,000 crore by selling (tier-II) corporate bonds, but the bank scrapped the sale as bids re uld not be contacted immediately for comments.

A banker said if it had gone ahead with its issue, Power Grid “could have found only a mop-up of about Rs 700 crore at rates they were eager ` to pay“. “Hence, the whole issue was scrapped,“ said the person who requested not to be named.

Markets are facing liquidity shortage to the tune of Rs 1.3-1.4 lakh crore daily as the government is holding higher cash balance with RBI and cash in circulation increases.

Another banker said mid-sized ceived were as high as 9.43%, about 150-160 basis points higher than he benchmark bond yield.

Similarly, state-owned UBI and Punjab and Sind Bank, too, decided not to float a bond issue after nvestors claimed higher-than-expected rates. Individual banks co state-owned banks are the most affected. “Already burdened with huge pile of bad loans, they are clearly not the favour of the season,“ said the banker.

Before the RBI policy on February 2, IDBI Bank tried to mop up about Rs 1,000 crore via corporate bonds, but it decided to cancel it as markets sought a rate of 8.65%, considered higher bid during that time.