Coupon rates on non-convertible debentures (NCDs) issued by private sector NBFCs during the first half of this financial year fell from the year-ago period even as the volume of public issuances jumped 16 times to Rs 23,901.37 crore, according to data available on the Sebi website.
Rates on NCDs with tenures ranging between one year and 10 years fell by close to a percentage point on an average as the money markets transmitted the 150-bps rate cuts effected by the Reserve Bank of India (RBI) between January 2015 and April 2016.
A Morgan Stanley report dated October 5 said that NCD borrowing costs for AAA-rated housing finance companies dropped nearly 70 bps alone in the last three months.
Market participants said easy liquidity conditions aided softening in rates. R Sivakumar, head of fixed income at Axis Mutual Fund, said: “We have had a substantial easing in liquidity which has been a big driving force and, as a result, short-term yields, especially, have fallen a lot.”
The absence of highly-rated state-owned issuers such as Power Finance Corporation, NTPC and Rural Electrification Corporation, which had made public issuances last year, have freed up room for NBFCs.
Ajay Manglunia, EVP and head of fixed income markets at Edelweiss Capital, said: “This year, there was no allocation in the Budget for tax-free (public issues). The infrastructure borrowing which was announced in the Budget for six-seven projects, they have preferred to go for the private placement route. So, the public issuance space is available for a lot of NBFCs, who need long-term resources.”
